RISK FACTORS

You should consider carefully the following risk factors, as well as the other information set forth in and incorporated by reference into this proxy statement/prospectus, before making a decision on the merger proposal, or the other matters presented. As a shareholder of the combined company following the completion of the proposed merger, you will be subject to all risks inherent in the business of Iberdrola USA in addition to the risks relating to UIL. The market value of your shares will reflect the performance of the business relative to, among other things, that of the competitors of Iberdrola USA and general economic, market and industry conditions. You should carefully consider the following factors as well as the other information contained in and incorporated by reference into this proxy statement/prospectus. In addition, the risks associated with UIL can be found in UIL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For information regarding the documents incorporated into this proxy statement/prospectus by reference, see the section entitled “Where You Can Find Additional Information” beginning on page 275 of this proxy statement/prospectus.

Risks Relating to the Proposed Merger

There is no assurance when or if the proposed merger will be completed.

Completion of the proposed merger is subject to the satisfaction or waiver of a number of conditions as set forth in the merger agreement, including regulatory and UIL shareowner approvals and other customary closing conditions. There can be no assurance that the conditions to completion of the proposed merger will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the proposed merger. In addition, each of Iberdrola USA and UIL may unilaterally terminate the merger agreement under certain circumstances, and Iberdrola USA and UIL may agree at any time to terminate the merger agreement, even if UIL shareowners have already approved the merger agreement and thereby approved the proposed merger and the other transactions contemplated by the merger agreement. Iberdrola USA and UIL can also terminate the merger agreement under other specified circumstances. For a discussion of the conditions to the completion of the proposed merger and the provisions relating to the termination of the proposed merger, see the sections entitled “The Merger Agreement—Conditions to Completing the Merger” beginning on page 139 of this proxy statement/prospectus and “The Merger Agreement—Termination” beginning on page 140 of this proxy statement/prospectus.

Iberdrola USA and UIL may be unable to obtain the regulatory approvals required to complete the proposed merger.

In addition to other conditions set forth in the merger agreement, completion of the proposed merger is conditioned upon the receipt of various state and U.S. federal regulatory approvals. The state regulatory approvals needed include but are not limited to approval by PURA and DPU. Iberdrola USA and UIL have made various filings and submissions and are pursuing all required consents, orders and approvals in accordance with the merger agreement. On April 7, 2015, the FTC and the DOJ notified Iberdrola USA and UIL that early termination of the statutory waiting period required under the HSR Act, and related rules, was granted. On June 2, 2015, authorization for the merger was received from FERC and on May 22, 2015, Iberdrola USA and UIL received approval of their transfer of control applications with respect to private radio licenses held by UIL subsidiaries from the FCC. On June 16, 2015, CFIUS issued a letter to the parties confirming that its review of the transaction is complete and there are no unresolved national security concerns. For a discussion of the required regulatory approvals, see the section entitled “The Merger—Regulatory Approvals Required for the Merger” beginning on page 104 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Reasonable Best Efforts to Obtain Required Approvals; Regulatory Matters” beginning on page 134 of this proxy statement/prospectus and section 6.9(b) of the merger agreement. These consents, orders and approvals may impose conditions on or require divestitures relating to the divisions, operations or assets of Iberdrola USA and UIL or may impose requirements, limitations or costs or place restrictions on the conduct of

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the combined company’s business, and if such consents, orders and approvals require an extended period of time to be obtained, such extended period of time could increase the chance that an event occurs that constitutes a material adverse effect with respect to Iberdrola USA or UIL and thereby may offer the other party an opportunity not to complete the proposed merger. Such extended period of time also may increase the chance that other adverse effects with respect to Iberdrola USA or UIL could occur, such as the loss of key personnel.

The merger agreement requires Iberdrola USA and UIL, among other things, to accept conditions, divestitures, requirements, limitations, costs or restrictions that may be imposed by regulatory entities, subject to the burdensome effect provisions in the merger agreement. Such conditions, divestitures, requirements, limitations, costs or restrictions may jeopardize or delay completion of the proposed merger, may reduce the benefits that may be achieved from the proposed merger or may result in the abandonment of the proposed merger. Further, no assurance can be given that the required consents, orders and approvals will be obtained or that the required conditions to closing will be satisfied, and, even if all such consents, orders and approvals are obtained and such conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents, orders and approvals.

The UIL shareowners meeting at which the merger agreement will be considered may take place before all of the required regulatory approvals have been obtained and before all conditions to such approvals, if any, are known. In this event, if the merger proposal is approved by UIL shareowners, Iberdrola USA and UIL may agree to, or be subjected to, certain regulatory conditions following the receipt of such shareowner approval vote and would not be required to seek further approval of UIL shareowners, even if such conditions could have an adverse effect on Iberdrola USA, UIL or the combined company.

The announcement and pendency of the proposed merger, during which Iberdrola USA and UIL are subject to certain operating restrictions, could have an adverse effect on Iberdrola USA’s and UIL’s businesses, results of operations, financial condition or cash flows.

The announcement and pendency of the proposed merger could disrupt Iberdrola USA’s and UIL’s businesses, and uncertainty about the effect of the proposed merger may have an adverse effect on Iberdrola USA, UIL or the combined company following the proposed merger. These uncertainties could disrupt the business of Iberdrola USA or UIL and cause suppliers, vendors, partners and others that deal with Iberdrola USA and UIL to defer entering into contracts with Iberdrola USA and UIL or making other decisions concerning Iberdrola USA and UIL or seek to change or cancel existing business relationships with Iberdrola USA and UIL. In addition, Iberdrola USA’s and UIL’s employees may experience uncertainty regarding their roles after the proposed merger, for example, employees may depart either before or after the completion of the proposed merger because of such uncertainty and issues relating to the difficulty of coordination or a desire not to remain following the proposed merger; and the pendency of the proposed merger may adversely affect Iberdrola USA’s and UIL’s ability to retain, recruit and motivate key personnel. Additionally, the attention of Iberdrola USA’s and UIL’s management may be directed towards the completion of the proposed merger including obtaining regulatory approvals and other transaction-related considerations and may be diverted from the day-to-day business operations of Iberdrola USA and UIL, as applicable, and matters related to the proposed merger may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to Iberdrola USA and UIL, as applicable. Additionally, the merger agreement requires Iberdrola USA and UIL to obtain each other’s consent prior to taking certain specified actions while the proposed merger is pending. These restrictions may prevent Iberdrola USA and UIL from pursuing otherwise attractive business opportunities or other capital structure alternatives and making other changes to its business or executing certain of its business strategies prior to the completion of the proposed merger. Further, the proposed merger may give rise to potential liabilities, including as a result of pending and future shareholder lawsuits relating to the proposed merger. Any of these matters could adversely affect the businesses of, or harm the results of operations, financial condition or cash flows of Iberdrola USA and UIL. For a discussion of the operating covenants to which Iberdrola USA and UIL are subject during the pendency of the proposed merger, see the sections entitled “The Merger Agreement—Conduct of Business Pending the Merger” beginning on page 126 of this proxy statement/prospectus.

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Iberdrola USA and UIL will incur substantial transaction fees and costs in connection with the proposed merger.

Iberdrola USA and UIL have incurred and expect to incur additional material non-recurring expenses in connection with the proposed merger and completion of the transactions contemplated by the merger agreement. Additional unanticipated costs may be incurred in the course of coordinating the businesses of Iberdrola USA and UIL after completion of the proposed merger. The parties cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the coordination of the two businesses after the completion of the proposed merger will offset the transaction and coordination costs in the near term, or at all. Further, even if the proposed merger is not completed, Iberdrola USA and UIL will need to pay certain pre-tax costs relating to the proposed merger incurred prior to the date the proposed merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Additionally, if the proposed merger is not completed within the expected timeframe, such delay may materially adversely affect the benefits that Iberdrola USA and UIL may achieve as a result of the proposed merger and could result in additional pre-tax transaction costs, loss of revenue or other effects associated with uncertainty about the proposed merger. Satisfying the conditions to, and completion of, the proposed merger may take longer than, and could cost more than, Iberdrola USA and UIL expect.

The Unaudited Pro Forma Combined Financial Information is presented for illustrative purposes only and may not be an indication of Iberdrola USA’s results of operations or financial condition following the completion of the proposed merger.

The unaudited pro forma combined financial information contained in this proxy statement/prospectus is presented for illustrative purposes only and should not be considered to be an indication of Iberdrola USA’s results of operation or financial condition following the completion of the proposed merger. The unaudited pro forma combined financial information has been derived from the historical financial statements of Iberdrola USA and UIL and adjustments, assumptions and preliminary estimates have been made in connection with the preparation of this information. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments, assumptions and estimates are difficult to make with accuracy. Moreover, the unaudited pro forma combined financial information does not reflect all costs that are expected to be incurred by Iberdrola USA in connection with the proposed merger. For example, the impact of any incremental costs incurred in coordinating the operations of Iberdrola USA and UIL are not reflected in the pro forma financial statements. As a result, the actual results of operations and financial condition of Iberdrola USA following the completion of the proposed merger may not be consistent with, or evident from, this pro forma financial information. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect Iberdrola USA’s results of operations or financial condition following the proposed merger. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the price for the common stock of the combined company following the closing of the merger.

The combined company may be unable to integrate successfully and the combined company may not experience the strategic and financial benefits being sought from the proposed merger.

Iberdrola USA and UIL have operated and, until the completion of the proposed merger will continue to operate, independently. If the proposed merger is completed, UIL will become an indirect wholly-owned subsidiary of the combined company but will initially continue its operations on a basis that is separate from the rest of the combined company’s subsidiaries’ operations. Coordinating certain aspects of the operations and personnel of UIL with Iberdrola USA after the completion of the proposed merger will involve complex operational, technological and personnel-related challenges. This process will be time-consuming and expensive, may disrupt the businesses of either or both of the companies and may not result in the benefits potentially available to Iberdrola USA and UIL. The potential difficulties, and resulting costs and delays, include:

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Further, while, either party can, in general, refuse to complete the proposed merger if there is a material adverse effect (as defined in the merger agreement) affecting the other party prior to the completion of the proposed merger, certain types of changes do not permit either party to refuse to complete the proposed merger, even if such changes would have a material adverse effect on Iberdrola USA or UIL. If adverse changes occur but Iberdrola USA and UIL must still complete the proposed merger, the market price of the combined company common stock may suffer. There can be no assurance that, if the proposed merger is not completed, these risks will not materialize and will not materially adversely affect the business and financial results of Iberdrola USA and UIL as separate companies.

UIL shareowners will not be entitled to appraisal rights in the proposed merger.

Pursuant to Section 33-856 of the CBCA, current holders of UIL common stock are not entitled to appraisal rights in the proposed merger with respect to their shares of UIL common stock. Pursuant to the terms of the merger agreement, at the completion of the proposed merger, each share of UIL common stock issued and outstanding and certain equity awards outstanding immediately prior to the completion of the proposed merger will be automatically cancelled and extinguished and converted into the right to receive the merger consideration, consisting of an equal number of shares of common stock of the combined company plus cash consideration of $10.50 per share or, in the case of certain equity awards, additional shares of common stock of the combined company calculated based on an exchange formula. If the proposed merger is not completed for any reason, Iberdrola USA and UIL will remain separate companies. For more information, see the section entitled “The Merger Agreement—Effects of the Merger; Merger Consideration” beginning on page 120 of this proxy statement/prospectus.

The termination of the merger agreement could negatively impact UIL.

If the merger is not completed for any reason, including as a result of UIL shareowners failing to approve the merger proposal, the ongoing businesses of UIL may be adversely affected and, without realizing any of the anticipated benefits of having completed the merger, UIL would be subject to a number of risks, including the following:

If the merger agreement is terminated and the UIL board seeks another merger, business combination or other transaction, UIL shareowners cannot be certain that UIL will be able to find a party willing to offer equivalent or more attractive consideration than the consideration UIL shareowners would receive in the merger. If the merger agreement is terminated under certain circumstances specified in the merger agreement, UIL may

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be required to pay Iberdrola USA a termination fee of $75 million, depending on the circumstances surrounding the termination. Additionally, UIL may be required to reimburse Iberdrola USA for its reasonable and documented out-of-pocket transaction fees and expenses, up to an amount of $15 million, with any such reimbursable expenses previously paid by UIL to Iberdrola USA credited and offset against UIL’s payment of the termination fee. See the sections entitled “The Merger Agreement—Fees and Expenses” beginning on page 142 of this proxy statement/prospectus for a more complete discussion of the circumstances under which the merger agreement could be terminated and when the termination fee and expense payment may be payable by UIL.

Litigation has been instituted against UIL, members of the UIL board of directors, Iberdrola USA and merger sub challenging the proposed merger, and adverse judgments in these lawsuits may prevent the proposed merger from becoming effective within the expected timeframe or at all.

UIL, members of the UIL board of directors, Iberdrola USA and merger sub have been and may continue to be named as defendants in putative class action lawsuits or other proceedings that may be brought by UIL shareowners challenging the proposed merger. If the plaintiffs in any of these actions seek a preliminary or permanent injunction and are successful in obtaining one, the parties may be prevented from completing the proposed merger in the expected timeframe, if at all. Even if the plaintiffs in these potential actions are not successful in obtaining an injunction, they may nevertheless continue the action and seek damages after the transaction has closed. In addition, the costs of defending against such claims could adversely affect the financial condition of UIL or Iberdrola USA and such actions could adversely affect the reputations of UIL or Iberdrola USA and members of their respective boards of directors or management. For more information, see the section entitled “The Merger—Litigation Relating to the Merger” beginning on page 106 of this proxy statement/prospectus.

Certain of the directors and executive officers of UIL may have interests in the merger that are different from, or in addition to, those of UIL shareowners generally.

Certain of the directors and executive officers of UIL may have interests in the merger that are different from, or in addition to, those of UIL shareowners generally. These interests include the continued employment of certain executive officers of UIL, the treatment in the merger of UIL stock options and other stock-based awards, annual bonus opportunities and other rights held by UIL’s directors and executive officers, and the indemnification of former UIL directors and officers by Iberdrola USA. UIL shareowners should be aware of these interests when they consider the recommendation of the UIL board that they vote in favor of the merger proposal. The UIL board was aware of and considered these interests when it determined that the terms of the merger agreement and the transactions contemplated thereby were fair to, and in the best interests of, UIL, and recommended that UIL shareowners approve the merger proposal and the transactions contemplated by the merger agreement. See the sections entitled “Interests of UIL’s Directors and Executive Officers in the Merger” beginning on page 108 of this proxy statement/prospectus and “Advisory Vote on Merger-Related Compensation for UIL’s Named Executive Officers” beginning on page 76 of this proxy statement/prospectus.

The Internal Revenue Service, or IRS, may assert that the merger does not qualify as a “reorganization” for federal income tax purposes.

Although Iberdrola USA and UIL will each receive “reorganization” tax opinions of their respective legal counsel, based on certain fundamental representations in UIL’s officer’s certificate and Iberdrola USA’s and merger sub’s officer’s certificate, to be delivered concurrently with the completion of the proposed merger, as to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, neither Iberdrola USA nor UIL has applied for, or expects to obtain, a ruling from the IRS with respect to the federal income tax consequences of the proposed merger. No assurance can be given that the IRS will agree with the positions taken in the legal opinions or will not challenge the income tax consequences of the proposed merger.

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The market price for the combined company common stock will be affected by factors different from those that historically have affected UIL common stock.

Following the merger, UIL shareowners will become shareholders of the combined company. The combined company’s business will differ from that of UIL, and accordingly the results of operations of the combined company will be affected by some factors that are different from those currently affecting the results of operations of UIL. For a discussion of the businesses of Iberdrola USA and of some important factors to consider in connection with such business, see the section entitled “Additional Information About Iberdrola USA” beginning on page 191 of this proxy statement/prospectus.

Iberdrola USA and UIL may be materially adversely affected by negative publicity related to the proposed merger and in connection with other matters.

From time to time, political and public sentiment in connection with the proposed merger and in connection with other matters may result in a significant amount of adverse press coverage and other adverse public statements affecting Iberdrola USA and UIL. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal claims. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceeding, can divert the time and effort of senior management from the management of Iberdrola USA’s and UIL’s respective businesses. Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of Iberdrola USA and UIL, on the morale and performance of their employees and on their relationships with their respective regulators. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on Iberdrola USA’s and UIL’s respective business, financial condition, results of operations and cash flows.

The merger agreement contains provisions that could discourage a potential alternative acquirer that might be willing to pay more to acquire UIL.

The merger agreement contains “no shop” provisions which state that UIL will not solicit or facilitate proposals regarding a merger or similar transaction with another party except in certain limited circumstances. While the UIL board may withdraw or change its recommendation regarding the merger agreement in response to an unsolicited third-party proposal to acquire UIL that the UIL board determines to be superior to the merger with Iberdrola USA, there are restrictions on its ability to do so. For a discussion of the “no shop” provisions and the provisions relating to the termination of the proposed merger, see the sections entitled “The Merger Agreement—No Solicitation by UIL” and “—Adverse Recommendation Change” beginning on pages 131 and 132 of this proxy statement/prospectus. These provisions could discourage a potential third-party acquirer from considering or proposing an alternative acquisition, even if it were prepared to pay consideration with a higher value than that proposed to be paid in the merger.

The fairness opinion obtained by UIL from its financial advisor reflects the fairness of the merger consideration, from a financial point of view, only as of the date of the opinion.

UIL obtained a fairness opinion dated February 25, 2015 from Morgan Stanley, which has not been updated as of the date of this document. In rendering its opinion, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters, which are beyond the control of UIL or Iberdrola USA. These include, among other things, the impact of competition on the businesses of UIL and Iberdrola USA, the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of UIL and Iberdrola USA, the industry and in the financial markets in general, which could affect the public trading value of UIL common stock by the time the merger is completed. The fairness opinion does not address the fairness of the merger consideration, from a

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financial point of view, at the time the merger is expected to be completed or as of any date other than the date of the opinion nor the prices at which UIL common stock will trade at any time. The fairness opinion that UIL received from Morgan Stanley is attached as Annex C to this proxy statement/prospectus. For a description of the opinion, see the section entitled “The Merger—Opinion of UIL’s Financial Advisor” beginning on page 95 of this proxy statement/prospectus. For a description of the other factors considered by the UIL board in determining to approve the merger, see the section entitled “The Merger—UIL’s Reasons for the Merger” beginning on page 90 of this proxy statement/prospectus.

Risks Relating to Iberdrola USA’s Regulatory Environment

Iberdrola USA’s businesses are subject to substantial regulation by federal, state and local regulatory agencies and its businesses, results of operations and prospects may be materially adversely affected by legislative or regulatory changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.

The operations of Iberdrola USA’s subsidiaries are subject to, and its businesses are influenced by, complex and comprehensive federal, state and local regulation and legislation, including regulations promulgated by state utilities commissions and FERC. This extensive regulatory and legislative framework, portions of which are more specifically identified in the following risk factors, regulates, among other things and to varying degrees, the industries in which Iberdrola USA’s subsidiaries operate, Iberdrola USA’s business segments, rates for Iberdrola USA’s products and services, financings, capital structures, cost structures, construction, environmental obligations (including in respect of, among others, air emissions, water consumption, water discharge, protections for wildlife and humans, nuisance prohibitions and allowances, and regulation of gas and oil infrastructure operations, and associated environmental and facility permitting), development and operation of electric and gas transmission and distribution facilities, natural gas transportation, processing and storage facilities, acquisition, disposal, depreciation and amortization of facilities and other assets, service reliability, hedging and derivatives transactions and Iberdrola Energy Holdings’ commodities trading.

In its business planning and in the management of its subsidiaries’ operations, Iberdrola USA must address the effects of regulation on its businesses, including the significant and increasing compliance costs imposed on Iberdrola USA’s operations as a result of such regulation, and any inability or failure to do so timely and adequately could have a material adverse effect on its businesses, results of operations, financial condition and cash flows. The federal, state and local political and economic environment has had, and may in the future have, an adverse effect on regulatory decisions with negative consequences for Iberdrola USA’s businesses. These decisions may require, for example, Iberdrola USA’s businesses to cancel or delay planned development activities, to reduce or delay other planned capital expenditures or investments or otherwise incur costs that it may not be able to recover through rates, any of which could have a material adverse effect on the business, results of operations, financial condition and cash flows of Iberdrola USA’s businesses. In addition, changes in the nature of the regulation of Iberdrola USA’s business could have a material adverse effect on its business, results of operations, financial condition and cash flows. Iberdrola USA is unable to predict future legislative or regulatory changes, initiatives or interpretations, and there can be no assurance that Iberdrola USA will be able to respond adequately or sufficiently quickly to such changes, although any such changes, initiatives or interpretations may increase costs and competitive pressures on Iberdrola USA, which could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows. There can be no assurance that Iberdrola USA will be able to respond adequately or sufficiently quickly to such rules and developments, or to any other changes that reverse or restrict the competitive restructuring of the energy industry in those jurisdictions in which such restructuring has occurred. Any of these events could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola USA’s businesses are subject to the jurisdiction of various federal, state and local regulatory agencies including, but not limited to, FERC, the Commodity Futures Trading Commission, or CFTC, the Department of Energy, or DOE, and the Environmental Protection Agency, or EPA. Further, Iberdrola Networks’ regulated utilities in New York and Maine are subject to the jurisdiction of the New York State Public Service

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Commission, or NYPSC, the Maine Public Utilities Commission, or MPUC, the New York State Department of Environmental Conservation and the Maine Department of Environmental Protection. These regulatory agencies cover a wide range of business activities, including, among other items, the retail and wholesale rates for electric energy, capacity and ancillary services, and for the transmission and distribution of these products, the costs charged to Iberdrola Networks’ customers through tariffs including cost recovery clauses, the terms and conditions of Iberdrola Networks’ services, procurement of electricity for Iberdrola Networks’ customers, issuances of securities, the provision of services by affiliates and the allocation of those service costs, certain accounting matters, and certain aspects of the siting, construction and transmission and distribution systems. FERC has the authority to impose penalties on regulated utilities owned by Iberdrola USA and the transmission and distribution of electricity and gas, which could be substantial, for violations of the FPA, the Natural Gas Act of 1938 or related rules, including reliability and cyber security rules as described in further detail below. The Financial Accounting Standards Board, or FASB, or the SEC may enact new accounting standards that could impact the way Iberdrola USA is required to record revenue, expenses, assets and liabilities. Certain regulatory agencies have the authority to review and disallow recovery of costs that they consider excessive or imprudently incurred and to determine the level of return that Iberdrola USA’s businesses are permitted to earn on invested capital. The regulatory process, which may be adversely affected by the political, regulatory and economic environment in New York or Maine, as applicable, may limit Iberdrola USA’s ability to increase earnings and does not provide any assurance as to achievement of authorized or other earnings levels. The disallowance of the recovery of costs incurred by Iberdrola USA or a decrease in the rate of return that Iberdrola USA is permitted to earn on its invested capital could have a material adverse effect on the business, results of operation, financial condition and cash flows of Iberdrola USA’s business. Certain of these regulatory agencies also have the authority to audit the management and operations of Iberdrola USA’s businesses in New York and Maine and require or recommend operational changes. Such audits and post-audit work requires the attention of the management and employees of Iberdrola USA and may divert their attention from other regulatory, operational or financial matters. The last management audit was by the NYPSC of Iberdrola, S.A., Iberdrola USA, New York State Electric & Gas Corporation, or NYSEG, and Rochester Gas & Electric Corporation, or RG&E, and completed in 2012. This audit resulted in 72 recommendations that were accepted by the NYPSC and that the companies verified as complete in 2014. As of April 24, 2015, the NYPSC has accepted 63 of the companies’ implementations as complete, and Iberdrola Networks continues to work with the NYPSC on the remaining nine recommendations. For additional information, see the section entitled “Additional Information About Iberdrola USA—Regulatory Environment and Principal Markets” beginning on page 204 of this proxy statement/prospectus.

Failure by Iberdrola USA to meet the reliability standards mandated by the Energy Policy Act of 2005 could have a material adverse effect on Iberdrola USA’s business, results of operation, financial condition and cash flows.

As a result of the Energy Policy Act of 2005, or EPAct 2005, owners, operators and users of bulk electric systems are subject to mandatory reliability standards developed by the North American Electric Reliability Corporation, or NERC, and its regional entities and approved and enforced by FERC. The standards are based on the functions that need to be performed to ensure that the bulk electric system operates reliably. Iberdrola Networks’ and Iberdrola Renewables’ businesses have been, and will continue to be, subject to routine audits and monitoring with respect to compliance with applicable NERC reliability standards, including standards approved by FERC that will result in an increase in the number of assets (including cyber-security assets) designated as “critical assets,” which would subject such assets to NERC cyber-security. NERC and FERC can be expected to continue to refine existing reliability standards as well as develop and adopt new reliability standards. Compliance with modified or new reliability standards may subject Iberdrola Networks’ and/or Iberdrola Renewables’ businesses to new requirements resulting in higher operating costs and/or increased capital expenditures. If Iberdrola Networks’ and/or Iberdrola Renewables’ businesses were found not to be in compliance with the mandatory reliability standards, it could be subject to penalties of up to $1.0 million per day per violation. Both the costs of regulatory compliance and the costs that may be imposed as a result of any actual or alleged compliance failures could have a material adverse effect on Iberdrola USA’s business, results of operation, financial condition and prospects.

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The NYPSC has initiated a proceeding that may result in the alteration of the public utility model in New York State and could materially and adversely impact the business and operations of Iberdrola USA in New York State.

In April 2014, the NYPSC initiated a proceeding intended to explore the “Reforming the Energy Vision” initiative, or REV, the goals of which are to improve electric system efficiency and reliability, encourage renewable energy resources, support distributed energy resources, or DER, and empower customer choice. In this proceeding, the NYPSC is examining the establishment of a Distributed System Platform, or DSP, to manage and coordinate DER, and provide customers with market data and tools to manage their energy use. The NYPSC also is examining how its regulatory practices should be modified to incent utility practices to promote REV objectives. The proceeding is following a two-phased schedule with an order relating to policy determinations for DSP and related matters issued in February 2015 and an order for regulatory design and regulatory matters, expected in 2016. Iberdrola USA is not able to predict the outcome of the REV proceeding or its impact on Iberdrola USA’s business, results of operations, financial condition and cash flows. While the end result of the REV process at the NYPSC remains unclear, it could alter the utility model in New York in a manner that could create material adverse impacts on the businesses and the operations of Iberdrola USA in New York.

Changes in regulatory and/or legislative policy could negatively impact Iberdrola Networks’ transmission planning and cost allocation.

The existing FERC-approved ISO New England, Inc., or ISO-NE, transmission tariff allocates the costs of transmission facilities that provide regional benefits to all customers of participating transmission-owning utilities. As new investment in regional transmission infrastructure occurs in any one state, its cost is shared across New England in accordance with a FERC approved formula found in the transmission tariff. Participating New England transmission owners’ agreement to this regional cost allocation is set forth in the Transmission Operating Agreement. This agreement can be modified with the approval of a majority of the transmission owning utilities and approval by FERC. In addition, other parties, such as state regulators, may seek certain changes to the regional cost allocation formula, which could have adverse effects on the rates Iberdrola Networks’ distribution companies in New England charge their retail customers.

FERC has issued rules requiring all regional transmission organizations, or RTOs, and transmission owning utilities to make compliance changes to their tariffs and contracts in order to further encourage the construction of transmission for generation, including renewable generation. This compliance will require RTOs (such as ISO-NE and NYISO) and the transmission owners in New England and New York to develop methodologies that allow for regional planning and cost allocation for transmission projects chosen in the regional plan that are designed to meet public policy goals such as reducing greenhouse gas emissions or encouraging renewable generation. Such compliance may also allow non-incumbent utilities and other entities to participate in the planning and construction of new projects in Iberdrola Networks’ service areas and regionally.

Changes in RTO tariffs, transmission owners’ agreements, or legislative policy, or implementation of these new FERC planning rules, could adversely affect Iberdrola USA’s transmission planning, results of operations, financial condition and cash flows.

Iberdrola USA is subject to numerous environmental laws, regulations and other standards, including rules and regulations with respect to climate change, that may result in capital expenditures, increased operating costs and various liabilities, and may require Iberdrola USA to limit or eliminate certain operations.

Iberdrola USA’s businesses are subject to environmental laws and regulations, including, but not limited to, extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality and usage, climate change, emissions of greenhouse gases (including, but not limited to carbon dioxide), waste management, hazardous wastes (including the clean-up of former manufactured gas and electric generation facilities), marine, avian and other wildlife mortality and habitat protection, historical artifact preservation, natural resources and health and safety (including, but not limited to, electric and magnetic fields from power

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lines and substations, and ice throw, shadow flicker and noise related to wind turbines) that could, among other things, prevent or delay the development of power generation, power or natural gas transmission, or other infrastructure projects, restrict the output of some existing facilities, limit the availability and use of some fuels required for the production of electricity, require additional pollution control equipment, and otherwise increase costs, increase capital expenditures and limit or eliminate certain operations. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations, and those costs could be even more significant in the future as a result of new legislation, the current trend toward more stringent standards, and stricter and more expansive application and enforcement of existing environmental regulations. For example, new laws, regulations or treaties relating to climate change could mandate new or increased requirements to control or reduce the emission of greenhouse gases, such as carbon dioxide, taxes or fees on fossil fuels or emissions, cap and trade programs, emission limits and clean or renewable energy standards. Violations of current or future laws, rules, regulations or other standards could expose Iberdrola USA’s subsidiaries to regulatory and legal proceedings, disputes with, and legal challenges by, third parties, and potentially significant civil fines, criminal penalties and other sanctions. Proceedings could include, for example, litigation regarding property damage, personal injury, common law nuisance, noise and enforcement by citizens or governmental authorities of environmental requirements such as air, water, wildlife and soil quality-standards.

Iberdrola USA’s regulated utility operations may not be able to recover costs in a timely manner or at all or obtain a return on certain assets or invested capital through base rates, cost recovery clauses, other regulatory mechanisms or otherwise.

Iberdrola Networks’ regulated utilities in New York and Maine are subject to periodic review of their rates by the NYPSC and MPUC, respectively, and the retail rates charged to Iberdrola Networks’ regulated utilities’ customers through base rates and cost recovery clauses are subject to the jurisdiction of the NYPSC or MPUC, as applicable. New rates may be proposed by the Iberdrola Network’s businesses, which are then subject to review, modification and final authorization and implementation by regulators. Alternatively, regulators may review the rates of Iberdrola Networks’ regulated utilities on their own motion. Iberdrola Networks’ regulated utilities’ rate plans cover specified periods, but rates determined pursuant to a plan generally continue in effect until a new rate plan is approved by the state utility regulator. The Iberdrola Networks’ regulated utilities’ business rate plans approved by state utility regulators limit the rates Iberdrola Networks’ regulated utilities can charge their customers. The rates are generally designed for, but do not guarantee, the recovery of Iberdrola Networks’ regulated utilities’ respective cost of service and the opportunity to earn a reasonable rate of return (including a return on equity, or ROE). Actual costs may exceed levels provided for such costs in the rate plans for Iberdrola Networks’ regulated utilities. Utility regulators can initiate proceedings to prohibit Iberdrola Networks’ regulated utilities from recovering from their customers the cost of service (including energy costs) that the regulators determine to have been imprudently incurred. Iberdrola Networks’ regulated utilities defer for future recovery certain costs including major storm costs and environmental costs. If Iberdrola Networks’ regulated utilities’ costs are not fully and timely recovered through the rates ultimately approved by regulators, Iberdrola USA’s cash flows, results of operations and financial condition, and its ability to earn a return on investment and meet financial obligations, could be adversely affected.

Iberdrola Networks’ regulated utilities in New York filed for new rates at the NYPSC on May 20, 2015. Central Maine Power Company, or CMP, filed for approval of a billing system on February 27, 2015. Maine Natural Gas Company, or MNG, filed a multi-year distribution rate case with the MPUC on March 5, 2015. On June 19, 2015 the MPUC Staff issued an analysis that proposed a disallowance between approximately $10 million and $30 million of capital investment. MNG will file a response to the staff analysis and the MPUC will conduct hearings before making a final determination on the rate filing, which is expected by the end of 2015. The outcome of future rates for the New York and Maine businesses remains uncertain due to the pending rate proceedings. Iberdrola Networks may not be able to recover from customers increasing costs, taxes or state-mandated assessments or surcharges, which could adversely affect Iberdrola Networks’ ability to generate a reasonable rate of return. Iberdrola Networks’ current electric and gas rate plans include revenue decoupling

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mechanisms, or RDMs, and the gas and electric rate plans of Iberdrola Networks’ New York regulated utilities include provisions for the recovery of energy costs, including reconciliation of the actual amount paid by Iberdrola Networks. There is no guarantee that such decoupling mechanisms or recovery and reconciliation mechanism will remain part of the rate plan of Iberdrola Networks in future rate proceedings.

Iberdrola Networks previously owned and operated manufactured gas and electric generation facilities. Most of these facilities have been sold or decommissioned. State and federal environmental laws impose continuing strict liability on former owners and operators to clean up environmental contamination that impacts human health or the environment. NYSEG and RG&E have a comprehensive state plan to investigate and clean up more than 40 former manufactured gas plants. NYSEG, RG&E and CMP are all allowed to recover reasonable clean-up costs in their current rate provisions. The timing, allowance, and mechanism for future clean-up cost recovery is subject to future rate proceedings. NYSEG, RG&E and CMP could also be responsible to decommission former generation facilities to ensure compliance with state and federal environmental and health and safety laws. RG&E is currently decommissioning two former fossil generation sites located in Rochester, New York, and while NYPSC has allowed cost recovery for the decommissioning, the total amount of the decommissioning costs, the allowance, and the timing could be subject to future rate proceedings. Iberdrola Networks may not be able to obtain, in a timely manner or at all, rate recovery in respect of all or a portion of the costs its subsidiaries may incur in respect of clean-up decommissioning manufactured gas and electric generation facilities.

In addition, there are pending challenges at FERC against New England transmission owners (including CMP) seeking to lower the ROE that these transmission owners are allowed by FERC to receive for wholesale transmission service pursuant to the ISO-NE Open Access Transmission Tariff. Reductions to returns on equity adversely impact the revenues that Iberdrola Networks’ regulated utilities receive from wholesale transmission customers and could materially adversely affect the business, results of operations, financial condition and cash flows of Iberdrola USA. For additional information, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Iberdrola USA—Factors Affecting Financial Condition and Results of Operations—Iberdrola Networks—New England Transmission Owners” beginning on page 148 of this proxy statement/prospectus.

Harming of protected species can result in curtailment of wind project operations and other damages.

The operation of energy projects and transmission of energy can adversely affect endangered, threatened or otherwise protected animal species under federal and state statutes, laws, rules and regulations. Wind projects involve a risk that protected flying species, such as birds and bats, will be harmed due to collision. Transmission and distribution lines are another source of potential avian collision as well as electrocution. Energy generation and transmission facilities can result in impacts to protected wildlife, including death caused by collision, electrocution and poisoning. Energy infrastructure occasionally affects endangered or protected species. Iberdrola USA’s businesses observe industry guidelines and government-recommended best practices to avoid, minimize and mitigate harm to protected species, but complete avoidance is not possible and subsequent penalties may result. Where appropriate, Iberdrola USA’s businesses can apply for an “incidental take” permit for protected species, which may be conditioned upon the institution of costly avoidance and remediation measures.

Violations of environmental laws in certain jurisdictions may result in civil or criminal penalties, including with respect to violations of certain laws protecting migratory birds, endangered species and eagles. The federal Endangered Species Act, or ESA, and analogous state laws restrict activities without a permit that may adversely affect endangered and threatened species or their habitat. The ESA also provides for private causes of actions against a development project, an operating facility, or the agency that oversees the alleged violation of law. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act, or MBTA, which implements various treaties and conventions between the United States and certain other nations for the protection of migratory birds and, pursuant to which the taking, killing or possessing of migratory birds is unlawful. Complying with the ESA and the MBTA may require implementation of operating restrictions or a

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temporary, seasonal, or permanent ban on operations in affected areas, which can materially adversely affect the revenue of those projects. Similar federal protections for eagles are provided for by the Bald and Golden Eagle Protection Act, or BGEPA, which prohibits the taking of eagles without a permit. The ESA, MBTA and BGEPA provide for criminal penalties for the “take” of protected species; the ESA and BGEPA also provide for civil penalties. Iberdrola Networks and Iberdrola Renewables are particularly prone to risks relating to birds and bats given the potential for collision and electrocution with their infrastructure, which can be considered an incidental “take” and therefore subject to penalties. The designation of new endangered or threatened species located in, or the movement or migration of species into areas where Iberdrola USA’s businesses operate could cause Iberdrola USA to incur additional costs or become subject to operating delays, restrictions or bans. For example, there have been recent sightings of the protected California condor at Iberdrola Renewables’ Manzana wind facility. Any incidental taking of a California condor could result in substantial financial, legal and reputational harm to Iberdrola USA. The U.S. Department of Justice is currently investigating Iberdrola Renewables for potential violations under the MBTA and the ESA at its Blue Creek facility and for potential violations of the MBTA and BGEPA at its three wind farms located in the state of Washington. Successful prosecutions or settlements relating to these potential violations or other violations involving environmental laws could result in material financial and reputational harm to Iberdrola USA. Taking of protected species can result in requirements to implement mitigation strategies, including curtailment of operations, short-term or long-term compensatory mitigation payments, investments or participation in mitigation research, and processing of and compliance with permits. Iberdrola USA cannot guarantee that its practices and mitigation strategies will not have a material adverse effect on its business, results of operations, financial condition and cash flows.

Iberdrola Renewables relies in part on governmental policies that support utility-scale renewable energy. Any reductions to, or the elimination of, governmental incentives that support utility-scale renewable energy or the imposition of additional taxes or other assessments on renewable energy, could result in a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola Renewables relies, in part, upon government policies that support utility-scale renewable energy projects and enhance the economic feasibility of developing and operating wind energy projects in regions in which Iberdrola Renewables operates or plans to develop and operate renewable energy facilities. The federal government and many states and local jurisdictions have policies or other mechanisms, such as tax incentives or renewable portfolio standards, or RPS, that support the sale of energy from utility-scale renewable energy facilities, such as wind and solar energy facilities. As a result of budgetary constraints, political factors or otherwise, federal, state and local governments from time to time may review their policies and other mechanisms that support renewable energy and consider actions that would make them less conducive to the development or operation of renewable energy facilities. Any reductions to, or the elimination of, governmental policies or other mechanisms that support renewable energy or the imposition of additional taxes or other assessments on renewable energy, could result in, among other items, the lack of a satisfactory market for the development of new renewable energy projects, Iberdrola Renewables abandoning the development of new renewable energy projects, a loss of Iberdrola Renewables’ investments in the projects and reduced project returns, any of which could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola USA’s businesses may face risks related to obtaining governmental approvals and permits in respect of project siting, financing, construction, operation and the negotiation of project development agreements.

Iberdrola Renewables owns, develops, constructs and/or operates electricity generation, including renewable and thermal generators, and associated transmission facilities. Iberdrola Energy Holdings owns, develops, constructs, manages and/or operates natural gas storage and associated transportation facilities. Iberdrola Networks develops, constructs, manages and operates transmission and distribution facilities to meet customer needs. As part of these operations, Iberdrola USA’s businesses must periodically apply for licenses and permits from various local, state, federal and other regulatory authorities and abide by their respective conditions. In particular, with respect to Iberdrola Renewables, over the past two years noise standards and siting criteria in the

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Northeast, where population density is higher compared to the Northwest, where Iberdrola Renewables also operates, have grown more restrictive. If Iberdrola USA’s businesses are unsuccessful in obtaining necessary licenses or permits on acceptable terms, there is a delay in obtaining or renewing necessary licenses or permits or regulatory authorities initiate any associated investigations or enforcement actions or impose related penalties or disallowances on Iberdrola USA, Iberdrola USA’s businesses, results of operations, financial conditions and cash flows could be materially adversely affected.

Iberdrola USA’s operating subsidiaries’ purchases and sales of energy commodities and related transportation and services expose Iberdrola USA to potential regulatory risks.

Under the EPAct 2005, as well as under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, Iberdrola USA’s businesses are subject to enhanced FERC and CFTC statutory authority to monitor certain segments of the physical and financial energy commodities markets. The Dodd-Frank Act creates a new regulatory framework for federal oversight of derivatives transactions by the CFTC and the SEC and requires the CFTC, the SEC and other regulatory agencies to promulgate rules and regulations implementing the legislation. These agencies have imposed broad regulations prohibiting fraud and manipulation of the electricity and gas markets. Under these laws, FERC and CFTC have promulgated new regulations that have increased compliance costs and imposed new reporting requirements on Iberdrola USA’s businesses. For example, the Dodd-Frank Act substantially increased regulation of the over-the-counter derivative contracts market and futures contract markets, which impacts Iberdrola USA’s businesses. The new regulations require Iberdrola USA’s operating subsidiaries to comply with certain margin requirements for its over-the-counter derivative contracts with certain CFTC- or SEC-registered entities and if the rules implementing the new regulations require Iberdrola USA to post significant amounts of cash collateral with respect to swap transactions, Iberdrola USA’s liquidity could be materially adversely affected. Iberdrola USA cannot predict the impact these new regulations will have on its businesses’ ability to hedge their commodity and interest rate risks or on over-the-counter derivatives markets as a whole, but they could potentially have a material adverse effect on Iberdrola USA’s businesses’ risk exposure, as well as reduce market liquidity and further increase the cost of hedging activities.

With regard to the physical purchases and sales of energy commodities, the physical trading of energy commodities and any related transportation and/or hedging activities that some of the operating subsidiaries of Iberdrola USA undertake, Iberdrola USA’s operating subsidiaries are required to observe the market-related regulations and certain reporting and other requirements enforced by the FERC, the CFTC and the SEC. Additionally, to the extent that the operating subsidiaries enter into transportation contracts with natural gas pipelines or transmission contracts with electricity transmission providers that are subject to FERC regulation, the operating subsidiaries are subject to FERC requirements related to the use of such transportation or transmission capacity. Any failure on the part of Iberdrola USA’s operating subsidiaries to comply with the regulations and policies of the FERC, the CFTC or the SEC relating to the physical or financial trading and sales of natural gas or other energy commodities, transportation or transmission of these energy commodities or trading or hedging of these commodities could result in the imposition of significant civil and criminal penalties. Failure to comply with such regulations, as interpreted and enforced, could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola Renewables’ ability to generate revenue from certain utility-scale wind energy power plants depends on having continuing interconnection arrangements, power purchase agreements, or PPAs, or other market mechanisms and depends upon interconnecting utility and RTO rules, policies, procedures and FERC tariffs that do not present restrictions to current and future wind project operations.

The electric generation facilities owned by Iberdrola Renewables rely on interconnection and/or transmission agreement and transmission networks in order to sell the energy generated by such facility. If the interconnection and/or transmission agreement of an electric generating facility Iberdrola Renewables owns is terminated for any reason, Iberdrola Renewables may not be able to replace it with an interconnection or

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transmission arrangement on terms as favorable as the existing arrangement, or at all, or it may experience significant delays or costs in securing a replacement. If a transmission network to which one or more of Iberdrola Renewables’ electric generating facilities is connected experiences outages or curtailments, the affected projects may lose revenue. These factors could materially affect Iberdrola Renewables’ ability to forecast operations and negatively affect Iberdrola USA’s business, results of operations, financial condition and cash flow. In addition, certain of Iberdrola Renewables’ operating facilities’ generation of electricity may be physically or economically curtailed, and offtakers or transmission or interconnection providers may be permitted to restrict wind project operations without paying full compensation to Iberdrola Renewables pursuant to PPA or interconnection agreement or FERC tariff provisions or rules, policies or procedures of RTOs, which may reduce Iberdrola USA’s revenues and impair Iberdrola USA’s ability to capitalize fully on a particular facility’s generating potential. Such curtailments or operational limitations could have a material adverse effect on Iberdrola USA’s business, financial condition, results of operations and cash flows. Furthermore, economic congestion on the transmission grid (for instance, a negative price difference between the location where power is put on the grid by a project and the location where power is taken off the grid by the project’s customer) in certain of the bulk power markets in which Iberdrola Renewables operates may occur and its businesses may be responsible for those congestion costs. Similarly, negative congestion costs may require that the wind projects either not participate in the energy markets or bid and clear at negative prices which may require the wind projects to pay money to operate each hour in which prices are negative. If such businesses were liable for such congestion costs or if the wind projects are required to pay money to operate in any given hour when prices are negative, then Iberdrola USA’s financial results could be adversely affected.

Iberdrola Energy Holdings’ natural gas storage operations are subject to regulation and reporting obligations by FERC and other federal and state regulatory agencies, including rules and regulations related to the rates its businesses can charge for their services and their ability to construct or abandon facilities. FERC’s rate-making policies could limit Iberdrola Energy Holdings’ ability to recover the full cost of operating its facilities, including earning a reasonable return.

Iberdrola Energy Holdings’ natural gas storage operations are subject to regulation and reporting obligations by FERC and other federal and state regulatory agencies or commissions, such as the Railroad Commission of Texas for facilities located in Texas. Such regulations and reporting obligations cover rates, the types, operating parameters, operating terms and conditions of services Iberdrola Energy Holdings may offer to its customers, the construction of new facilities, the creation, expansion, modification or abandonment of services or facilities, creditworthiness and credit-supporting requirements, recordkeeping and relationships with affiliated companies involved in similarly situated aspects of the natural gas storage business. Iberdrola Energy Holdings may also perform certain engineering studies and/or engineering analysis resulting in a reduction of net working gas capacity and the potential reclassification to pad gas. FERC or state regulatory action in any of these areas could adversely affect Iberdrola Energy Holdings’ ability to compete for business, construct new facilities, modify or expand existing facilities, offer new services or recover the full cost of operating Iberdrola Energy Holdings’ storage facilities. Jurisdiction-specific regulatory oversight could also result in longer lead times to develop and complete any existing or future project than competitors that are not subject to such regulations.

New or amended pipeline safety laws and regulations requiring substantial changes to existing integrity management programs or safety technologies could subject Iberdrola Energy Holdings’ natural gas storage operations as well as Iberdrola Networks’ natural gas distribution operating companies to increased capital and operating costs and require them to use more comprehensive and stringent safety controls.

Iberdrola Energy Holdings’ natural gas storage operations as well as Iberdrola Networks’ natural gas distribution companies are subject to regulation by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, or PHMSA, under the Natural Gas Pipeline Safety Act of 1968, or NGPSA, as amended, which regulates the design, installation, testing, construction, operation, maintenance, repair, inspection, replacement and management of interstate and certain intrastate natural gas pipeline facilities. PHMSA, through NGPSA, has adopted rules under the NGPSA that require natural gas storage and pipeline

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operators to implement integrity management programs, including more frequent inspections, correction of identified anomalies and other measures to ensure pipeline safety in high consequence areas, such as high population areas, areas unusually sensitive to environmental damage and commercially navigable waterways. These regulations have resulted in an overall increase in maintenance costs for Iberdrola Energy Holdings. PHMSA may develop more stringent regulations applicable to integrity management programs and other aspects of Iberdrola USA’s operations, which may be hastened by recently highly-publicized incidents on certain pipelines in the United States. Iberdrola USA could incur significant additional costs if new or more stringent pipeline safety requirements are implemented. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011, or the 2011 Act, was enacted and signed into law in early 2012. Under the 2011 Act, maximum civil penalties for certain violations have been increased to $200,000 per violation per day, and from a total cap of $1.0 million to $2.0 million. In addition, the 2011 Act reauthorized the federal pipeline safety programs of PHMSA through September 30, 2015, and directs the Secretary of Transportation to undertake a number of reviews, studies and reports, some of which may result in more stringent safety controls or inspections or additional natural gas and hazardous liquids pipeline safety rulemaking. A number of the provisions of the 2011 Act have the potential to cause owners and operators of pipeline facilities to incur significant capital expenditures and/or operating costs. Iberdrola Energy Holdings’ natural gas storage operations, through its wholly-owned direct subsidiary Enstor, Inc., are also regulated by the EPA and state environmental agencies. Therefore, Iberdrola Energy Holdings’ natural gas storage operations must comply with certain environmental permits promulgated by the following emissions based standards and regulations: the National Emission Standards for Hazardous Air Pollutants, New Source Performance Standards and National Ambient Air Quality Standards. If Iberdrola USA incurs additional expenses and expenditures due to increased regulation, its business, results of operation, financial condition and cash flows could be adversely affected.

Risks Relating to Iberdrola USA’s Business and Operations

Iberdrola USA’s businesses are subject to general economic, credit and market conditions.

A credit crisis affecting the banking system and the financial markets and the resultant deterioration of macroeconomic conditions, including a global reduction in credit and liquidity in the financial markets and severe volatility in stock and bond markets could impact the financial operating conditions of Iberdrola USA, its day-to-day activities, its liquidity and cash positions, the loss of significant investment opportunities, the value of its business and its financial condition. In addition, during periods of slow or little economic growth, energy conservation efforts often increase and the amount of uncollectible customer accounts increases. These factors may also reduce earnings and cash flow.

If Iberdrola Networks’ electricity and natural gas transmission and distribution systems do not operate as expected, they could require unplanned expenditures, including the maintenance and refurbishment of Iberdrola Networks’ facilities, which could adversely affect Iberdrola USA’s business, results of operations, financial position and cash flows.

Iberdrola Networks’ ability to operate its electricity and natural gas transmission and distribution systems is critical to the financial performance of Iberdrola USA’s business. The ongoing operation of Iberdrola Networks’ facilities involves risks customary to the electric and natural gas industry that include the breakdown, failure, loss of use or destruction of Iberdrola Networks’ facilities, equipment or processes or the facilities, equipment or processes of third parties due to war or acts of terrorism, operational and safety performance below expected levels, errors in the operation or maintenance of these facilities and the inability to transport electricity or natural gas to customers in an efficient manner. These and other occurrences could reduce potential earnings and cash flows and increase the costs of repairs and replacement of assets. Losses incurred by Iberdrola Networks in respect of such occurrences may not be fully recoverable through insurance or customer rates. Further, certain of Iberdrola Networks’ facilities require periodic upgrading and improvement. Iberdrola Networks continuously updates and improves its facilities. For example, NYSEG and RG&E plan to invest a total of $2.75 billion from 2015 to 2019 to upgrade and expand their electricity and natural gas transmission and distribution infrastructure, while CMP is near completion of a $1.4 billion investment plan for the construction of a project to enhance the

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bulk power transmission grid in Maine. In addition, unplanned outages typically increase Iberdrola Networks’ operation and maintenance expenses. Any unexpected failure, including failure associated with breakdowns, forced outages or any unanticipated capital expenditures, accident, failure of major equipment, shortage of or inability to acquire critical replacement or spare parts, could result in reduced profitability or regulatory penalties. For more information, see “Risks Relating to Iberdrola USA’s Regulatory Environment.”

Iberdrola USA’s businesses’ operations and power production may fall below expectations due to the impact of severe weather or other natural events, which could adversely affect Iberdrola USA’s cash flows, results of operations and financial position.

Weather conditions directly influence the demand for electricity and natural gas and other fuels and affect the price of energy and energy-related commodities. Severe weather, such as ice and snow storms, hurricanes and other natural disasters, such as hurricanes, floods and earthquakes, can be destructive and cause power outages, bodily injury and property damage or affect the availability of fuel and water, which may require Iberdrola Networks and Iberdrola Energy Holdings to incur additional costs or loss of revenues, for example, to restore service and repair damaged facilities, to obtain replacement power and to access available financing sources, that may not be recoverable from customers, which could adversely affect Iberdrola USA’s cash flows, results of operations and financial position. Many of Iberdrola USA’s facilities could be placed at greater risk of damage should changes in the global climate produce unusual variations in temperature and weather patterns, resulting in more intense, frequent and extreme weather events, abnormal levels of precipitation and a change in sea level. A disruption or failure of electric generation, transmission or distribution systems or natural gas production, transmission, storage or distribution systems in the event of ice and snow storms, long periods of severe weather, hurricane, tornado or other severe weather event, or otherwise, could prevent Iberdrola USA from operating its business in the normal course and could result in any of the adverse consequences described above. Because utility companies, including Iberdrola USA’s regulated electric and natural gas utility subsidiaries, have large consumer customer bases, they are subject to adverse publicity focused on the reliability of their distribution services and the speed with which they are able to respond to electric outages, natural gas leaks and similar interruptions caused by storm damage or other unanticipated events. Adverse publicity of this nature could harm the reputations of Iberdrola USA and its subsidiaries. Furthermore, many of Iberdrola Networks’ and, through its wholly-owned direct subsidiary Enstor, Inc., Iberdrola Energy Holdings’ operating facilities are located either in, or close to, densely populated public places. A failure of, or damage to, these facilities, could result in bodily injury or death, property damage, the release of hazardous substances or extended service interruptions. The cost of repairing damage to Iberdrola Networks’ and Iberdrola Energy Holdings’ facilities and the potential disruption of their operations due to storms, natural disasters or other catastrophic events could be substantial. In respect of the businesses of Iberdrola USA where cost recovery is available, recovery of costs to restore service and repair damaged facilities is or may be subject to regulatory approval, and any determination by the regulator not to permit timely and full recovery of the costs incurred could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

If wind conditions are unfavorable or below Iberdrola Renewables’ production forecasts, or Iberdrola Renewables’ wind turbines are not available for operation, Iberdrola Renewables projects’ electricity generation and the revenue generated from its projects may be substantially below Iberdrola USA’s expectations.

Changing wind patterns or lower than expected wind resource could cause reductions in electricity generation at Iberdrola Renewables’ projects, which could affect the revenues produced by these wind generating facilities. Iberdrola Renewables’ wind projects are sited, developed and operated to maximize wind performance. Prior to siting a wind facility, detailed studies are conducted to measure the wind resource in order to estimate future production. However, wind patterns or wind resource in the future might deviate from historical patterns and are difficult to predict. These events could negatively impact the results of operations of Iberdrola Renewables, which may vary significantly from period to period, depending on the level of available resources. To the extent that resources are not available at planned levels, the financial results from these facilities may be

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less than expected. Changing wind patterns or lower than expected wind resources could also degrade equipment or components and the interconnection and transmission facilities’ lives or maintenance costs. Replacement and spare parts for wind turbines and key pieces of electrical equipment may be difficult or costly to acquire or may be unavailable. The loss of any suppliers or service providers or inability to find replacement suppliers or service providers or to purchase turbines at rates currently offered by Iberdrola Renewables’ existing suppliers or a change in the terms of Iberdrola Renewables’ supply or operations and maintenance agreements, such as increased prices for maintenance services or for spare parts, could have a material adverse effect on Iberdrola Renewables’ ability to construct and maintain wind farms or the profitability of wind farm development and operation.

The revenues generated by Iberdrola Renewables’ facilities depend upon Iberdrola Renewables’ ability to maintain the working order of its wind turbines. A natural disaster, severe weather, accident, failure of major equipment, shortage of or inability to acquire critical replacement or spare parts, failure in the operation of any future transmission facilities that Iberdrola Renewables may acquire, including the failure of interconnection to available electricity transmission or distribution networks, could damage or require Iberdrola Renewables to shut down its turbines or related equipment and facilities, leading to decreases in electricity generation levels and revenues. Additionally, Iberdrola Renewables’ operating projects generally do not hold spare substation main transformers in inventory. These transformers are designed specifically for each wind power project, and order lead times can be lengthy. If one of Iberdrola Renewables’ projects had to replace any of its substation main transformers, it would be unable to sell all of its power until a replacement is installed.

If Iberdrola Renewables experiences a prolonged interruption at one of its operating projects due to natural events or operational problems and such events are not fully covered by insurance, Iberdrola Renewables’ electricity generation levels could materially decrease, which could have a material adverse effect on its business, results of operation and financial condition and could adversely affect Iberdrola USA’s cash flows, results of operations and financial position.

Cyber breaches, acts of war or terrorism, grid disturbances or security breaches involving the misappropriation of confidential and proprietary customer, employee, financial or system operating information could negatively impact Iberdrola USA’s business.

Cyber breaches, acts of war or terrorism or grid disturbances resulting from internal or external sources could target Iberdrola USA’s subsidiaries’ generation, transmission and distribution facilities or Iberdrola USA’s information technology systems. In the regular course of business, the subsidiaries of Iberdrola USA maintain sensitive customer, employee, financial and system operating information and are required by various federal and state laws to safeguard this information. Cyber or physical security intrusions could potentially lead to disabling damage to Iberdrola USA’s generation, transmission and distribution facilities and to theft and the release of critical operating information or confidential customer or employee information, which could adversely affect Iberdrola USA’s subsidiaries’ operations or adversely impact Iberdrola USA’s reputation, and could result in significant costs, fines and litigation. Additionally, because Iberdrola USA’s subsidiaries’ generation and transmission facilities are part of an interconnected regional grid, Iberdrola USA’s subsidiaries face the risk of blackout due to a disruption on a neighboring interconnected system. As threats evolve and grow increasingly more sophisticated, Iberdrola USA cannot ensure that a potential security breach may not occur or quantify the potential impact of such an event. Any such cyber breaches could result in a significant decrease in revenues, significant expense to repair system damage or security breaches, regulatory penalties and liability claims, which could have a material adverse effect on Iberdrola USA’s cash flows, results of operations and financial condition.

Risks including but not limited to any physical security breach involving unauthorized access, electricity or equipment theft and vandalism could adversely affect Iberdrola USA’s business operations and adversely impact Iberdrola USA’s reputation.

A physical attack on Iberdrola USA’s subsidiaries’ transmission and distribution infrastructure could interfere with normal business operations and affect Iberdrola USA’s subsidiaries’ ability to control their

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transmission and distribution assets. A physical security intrusion could potentially lead to theft and the release of critical operating information, which could adversely affect Iberdrola USA’s subsidiaries’ operations or adversely impact Iberdrola USA’s reputation, and could result in significant costs, fines and litigation. Additionally, certain of Iberdrola USA’s subsidiaries’ power generation and transmission and distribution assets and equipment are at risk for theft and damage. For example, Iberdrola Networks is at risk for copper wire theft, especially, due to an increased demand for copper in the United States and internationally. Theft of copper wire or solar panels can cause significant disruption to Iberdrola Networks’ and Iberdrola Renewables’ operations, respectively, and can lead to operating losses at those locations. Furthermore, Iberdrola Renewables can incur damage to wind turbine equipment, either through natural events such as lightning strikes that damage blades or in-ground electrical systems used to collect electricity from turbines, or through vandalism, such as gunshots into towers or other generating equipment. Such damage can cause disruption of operations for unspecified periods which may lead to operating losses at those locations.

Iberdrola USA’s risk management policies cannot fully eliminate the risk associated with some of its operating subsidiaries’ commodity trading and hedging activities, which may result in significant losses.

Iberdrola Renewables and Iberdrola Energy Holdings have exposure to commodity price movements through their “natural” long positions in electricity and natural gas storage in addition to proprietary trading and hedging activities.

Iberdrola Networks, Iberdrola Renewables and Iberdrola Energy Holdings manage the exposure to risks of commodity price movements through internal risk management policies, enforcement of established risk limits and risk management procedures. These risk policies, risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities. Even when these risk policies and procedures are followed, and decisions are made based on projections and estimates of future performance, results of operations may be diminished if the judgments and assumptions underlying those decisions prove to be incorrect. Iberdrola USA’s risk management tools and metrics associated with their hedging and trading procedures, such as daily value at risk, stop loss limits and liquidity guidelines, are based on historical price movements. Due to the inherent uncertainty involved in price movements and potential deviation from historical pricing behavior, Iberdrola USA is unable to assure that their risk management tools and metrics will be effective to protect against material adverse effects on their business, financial condition, results of operations and prospects. Factors, such as future prices and demand for power and other energy-related commodities, become more difficult to predict and the calculations become less reliable the further into the future estimates are made. As a result, Iberdrola USA cannot fully predict the impact that some of its subsidiaries’ commodity trading and hedging activities and risk management decisions may have on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola USA expects to invest in development opportunities in all segments of its business, but such opportunities may not be successful and projects may not commence operation as scheduled or at all, or be completed within budget or at all, which could have a material adverse effect on Iberdrola USA’s business prospects.

Iberdrola USA is pursuing broader development investment opportunities related to all segments of its business, particularly in respect of additional construction projects in respect of renewable energy generation. The development, construction and expansion of such facilities involve numerous risks. Various factors could result in increased costs or result in delays or cancellation of these projects. Risks include regulatory approval processes, new legislation, economic events or factors, environmental and community concerns, design and siting issues, difficulties in obtaining required rights of way, competition from incumbent facilities and other entities, and actions of strategic partners. Should any of these factors result in such delays or cancellations, Iberdrola USA’s business, financial position, results of operations, and cash flows could be adversely affected or its future growth opportunities may not be realized as anticipated.

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The progressive reduction in the costs of distributed energy assets, as a result of technological improvements, large scale deployment in certain jurisdictions and constructive support regimes could result in customer defection.

The emergence of technology and the proliferation and structure of rate incentives to distributed energy assets, such as net energy metering which allows electricity customers who supply their own electricity from on-site generation to pay only for the net energy obtained from the utility, behind-the-meter storage systems and grid integration components such as inverters or electronics, could result in electricity delivery customers abandoning the grid system or replacing part of grid services with self-supply or self-balancing, or could impact the return on current or future network assets deployed and designed to serve projected load. Such emergence of alternative sources of energy supply can result in customers relying on the power grid for limited use, such as in the case of a deficit or an emergency, or completely abandoning the grid, which is known as customer defection. While the operating subsidiaries of Iberdrola Networks are protected from reduced volumetric sales by decoupling mechanisms, which delinks a utility’s delivery revenues from volumetric sales, these are temporary in nature and there is no assurance such mechanisms will be extended. The progressive reduction in the costs of distributed energy assets, as a result of technological improvements, large scale deployment in certain jurisdictions and constructive support regimes could result in customer defection (individually or integrated in micro-grids) when a net benefit analysis of investing in self-supply and storage of energy compared to energy provided by utility service appears attractive for certain customer classes. Similarly, some current costs or future investments in networks could be impacted, such as allocating more costs to certain customer segments, if adequate rate making does not fully contemplate the characteristics of an integrated reliable grid from a unified perspective, regardless of customer disconnection. Further, the interoperability, integration and standard connection of these distributed energy devices and systems could place a burden on the system of Iberdrola Networks’ operating subsidiaries, without adequately compensating them.

Advances in technology could impair or eliminate the competitive advantage of Iberdrola USA’s businesses.

The emergence of initiatives designed to reduce greenhouse gas emissions and control or limit the effects of global warming and overall climate change has increased the incentive for the development of new technologies for power generation and energy efficiency, and for investment in research and development to make those technologies more efficient and cost-effective. There is potential that distributed generation systems and energy efficiency measures could adversely affect the demand for services of Iberdrola USA’s regulated subsidiaries thus impacting revenues, which could adversely affect Iberdrola USA’s cash flows, results of operations and financial condition. Furthermore, the technologies used in the renewable energy sector change and evolve rapidly. Techniques for the production of electricity from renewable sources are constantly improving and becoming more complex. In order to maintain Iberdrola Renewables’ competitiveness and expand its business, Iberdrola Renewables must adjust effectively to changes in technology and further its research and development. If Iberdrola Renewables fails to react effectively to current and future technological changes in the sector or to progress its research and development in a timely manner, Iberdrola Renewables’ future business growth, results of operations and financial condition could be materially adversely affected.

Investments in development opportunities in electricity generation, transmission and distribution and natural gas storage and transportation may not be successful and projects may not commence or complete operation as scheduled or be within budget.

The operating subsidiaries of Iberdrola USA pursue development opportunities related to electric transmission and renewable energy generation, interconnections to generating resources and other investment opportunities. The development, construction and expansion of projects involve numerous risks. Various factors could result in increased costs or result in delays or cancellation of these projects. Risks include regulatory approval processes, permitting, new legislation, economic events or factors, environmental and community concerns, negative publicity, design and siting issues, difficulties in obtaining required rights of way, construction delays and cost overruns, competition from incumbent utilities and other entities, and actions of strategic partners. If any of these factors result in delays or cancellations to these projects, Iberdrola USA’s

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growth projections, results of operations and financial position could be adversely affected or Iberdrola USA’s future growth opportunities may not be realized as anticipated. For example, NYSEG and RG&E hold approximately 20% ownership interest in the regulated New York Transco, LLC, or New York Transco, along with other investor owned utilities. In December 2014, New York Transco filed for regulatory approval of a transmission project. While New York Transco received an order from FERC in April 2015 accepting the project’s risk mitigation measures, FERC rejected the project’s cost allocation proposal and ordered a settlement and hearing proceeding on the proposed capital structure and the base ROE. Additionally, there may be delays or unexpected developments in completing Iberdrola Renewables’ current and future construction projects, which could cause the construction costs of these projects to exceed Iberdrola USA’s expectations. While most of Iberdrola USA’s subsidiaries’ construction projects are constructed under fixed-price and fixed-schedule contracts with construction and equipment suppliers, these contracts provide for limitations on the liability of these contractors to pay Iberdrola USA’s subsidiaries liquidated damages for cost overruns and construction delays. In respect of Iberdrola Renewables’ wind projects, a delay resulting in a wind project failing to qualify for federal production tax credits could result in losses that would be substantially greater than the amount of liquidated damages paid to Iberdrola Renewables.

Iberdrola USA’s subsidiaries may suffer significant construction delays or construction cost increases as a result of regulatory approval processes, environmental and community concerns, negative publicity, design and siting issues, difficulties in obtaining required rights of way or underperformance of these contractors and equipment suppliers, as well as other suppliers, to Iberdrola USA’s subsidiaries’ projects. For example, while RG&E’s Rochester Area Reliability Project, which includes the development of a new substation and transmission lines, was approved by the NYSPC, the project has encountered significant delays due to the concerns of landowners. Delays in equipment deliveries, particularly of wind turbines or transformers, or severe weather may result in extended delays in project construction and completion. These circumstances could prevent Iberdrola Renewables’ construction projects from commencing operations or from meeting Iberdrola Renewables’ original expectations about how much electricity it will generate or the returns it will achieve. In addition, for projects that are subject to PPAs, substantial delays could cause defaults under the PPAs, which generally require the completion of project construction by a certain date at specified performance levels.

Iberdrola Renewables’ revenue may be reduced significantly upon expiration of PPAs if the market price of electricity decreases and Iberdrola Renewables is otherwise unable to negotiate more favorable pricing terms.

Iberdrola Renewables’ portfolio of PPAs is made up of PPAs that primarily have fixed or otherwise predetermined electricity prices for the life of the PPA. A decrease in the market price of electricity, including due to lower prices for traditional fossil fuels, could result in a decrease in revenues once a PPA has expired or upon a renewal of a PPA, unless market conditions recover at the time of expiration and/or Iberdrola Renewables is able to negotiate more favorable pricing terms. Any decrease in the price payable to Iberdrola Renewables under new PPAs could materially adversely affect Iberdrola USA’s business, results of operations, financial conditions and cash flows. In the majority of Iberdrola Renewables’ wind energy generation projects, upon the expiration of a PPA, the project becomes a merchant project subject to market risks, unless Iberdrola Renewables can negotiate a renewal of the PPA. If Iberdrola Renewables is not able to replace an expiring PPA with a contract on equivalent terms and conditions or otherwise obtain prices that permit operation of the related facility on a profitable basis, the affected site may temporarily or permanently cease operations.

There are a limited number of purchasers of utility-scale quantities of electricity, which exposes Iberdrola Renewables’ utility-scale projects to additional risk.

Since the transmission and distribution of electricity is highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility-scale quantities of electricity in a given geographic location, including transmission grid operators, state and investor-owned power companies, public utility districts and cooperatives. As a result, there is a concentrated pool of potential buyers for electricity generated by Iberdrola Renewables’ businesses, which may restrict their ability to negotiate favorable terms under new PPAs and could

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impact their ability to find new customers for the electricity generated by their generation facilities should this become necessary. Furthermore, if the financial condition of these utilities and/or power purchasers deteriorated or the RPS programs, climate change programs or other regulations to which they are currently subject and that compel them to source renewable energy supplies change, demand for electricity produced by Iberdrola Renewables’ businesses could be negatively impacted.

Lower prices for other fuel sources may reduce the demand for wind and solar energy development.

Wind and solar energy demand is affected by the price and availability of other fuels, including nuclear, coal, natural gas and oil, as well as other sources of renewable energy. To the extent renewable energy, particularly wind and solar energy, becomes less cost-competitive due to reduced government targets, increases in the cost of wind and solar energy, as a result of new regulations, and incentives that favor alternative renewable energy, cheaper alternatives or otherwise, demand for wind and solar energy and other forms of renewable energy could decrease. Slow growth or a long-term reduction in the demand for renewable energy could have a material adverse effect on Iberdrola Renewables’ ability to grow its business.

Iberdrola USA’s subsidiaries do not own all of the land on which their projects are located and their use and enjoyment of real property rights for their projects may be adversely affected by the rights of lienholders and leaseholders that are superior to those of the grantors of those real property rights to Iberdrola USA’s subsidiaries’ projects.

Iberdrola USA’s subsidiaries do not own all of the land on which their projects are located. For example, Iberdrola Renewables does not own all of the land on which its wind projects are located and Iberdrola Energy Holdings does not own all of the land on which its natural gas storage projects are located. Such projects generally are, and future projects may be, located on land occupied under long-term easements, leases and rights of way. The ownership interests in the land subject to these easements, leases and rights of way may be subject to mortgages securing loans or other liens and other easements, lease rights and rights of way of third parties that were created previously. As a result, some of the rights under such easements, leases or rights of way held by Iberdrola USA’s operating subsidiaries may be subject to the rights of these third parties, and the rights of Iberdrola USA’s operating subsidiaries to use the land on which their projects are or will be located and their projects’ rights to such easements, leases and rights of way could be lost or curtailed. Any such loss or curtailment of the rights of Iberdrola USA’s operating subsidiaries to use the land on which their projects are or will be located could have a material adverse effect on their business, results of operations, financial condition and cash flows.

Iberdrola USA and its subsidiaries are subject to litigation or administrative proceedings.

The operating subsidiaries of Iberdrola USA have been and continue to be involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business. These actions may include environmental claims, employment-related claims and contractual disputes or claims for personal injury or property damage that occur in connection with services performed relating to the operation of Iberdrola USA’s businesses, or actions by regulatory or tax authorities. Unfavorable outcomes or developments relating to these proceedings or future proceedings, such as judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on Iberdrola USA’s business, financial condition and results of operations. In addition, settlement of claims could adversely affect Iberdrola USA’s business, results of operations, financial condition and cash flows.

Long-term low natural gas prices and/or seasonal natural gas price spreads could have a negative impact on the demand for Iberdrola Energy Holdings’ natural gas storage services.

Storage businesses benefit from price volatility and temporal price spreads, which impacts the level of demand for services and the rates that can be charged for natural gas storage services. On a system-wide basis, natural gas is typically injected into storage between April and October when natural gas prices are generally

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lower and withdrawn during the winter months of November through March when natural gas prices are typically higher. Largely due to the abundant supply of natural gas made available by hydraulic fracturing techniques, natural gas prices have dropped significantly to levels that are near historic lows. If prices and volatility remain low or prices decline further, then the demand for natural gas storage services, and the prices that Iberdrola Energy Holdings will be able to charge for those services, may decline or be depressed for a prolonged period of time. A sustained decline in these prices and volatility could have an adverse impact on Iberdrola USA’s business, results of operation, financial condition and cash flows. Furthermore, low gas prices drive down electricity prices and may lower prices in certain power markets, which may have a potentially adverse impact on prices for uncontracted generation and future PPAs for Iberdrola USA’s businesses.

Storing and transporting natural gas involves inherent risks that could cause Iberdrola USA to incur significant financial losses.

There are inherent hazards and operation risks in gas distribution activities, such as leaks, accidental explosions and mechanical problems that could cause the loss of human life, significant damage to property, environmental pollution and impairment of operations. The location of pipelines and storage facilities near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks. These activities may subject Iberdrola USA to litigation and administrative proceedings that could result in substantial monetary judgments, fines or penalties. To the extent that the occurrence of any of these events is not fully covered by insurance, they could adversely affect Iberdrola USA’s revenue, earnings and cash flow.

Iberdrola USA is not able to insure against all potential risks and may become subject to higher insurance premiums, and the ability of Iberdrola USA to obtain insurance and the terms of any available insurance coverage could be materially adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers.

Iberdrola USA’s businesses and activities are exposed to the risks inherent in the construction and operation of their respective assets, such as electrical power plants, wind power plants and other renewable energy projects and natural gas storage facilities, including breakdowns, manufacturing defects, natural disasters, terrorist attacks, cyber attacks and sabotage. Iberdrola USA’s subsidiaries are also exposed to third party liability risks and environmental risks. While the operating subsidiaries of Iberdrola USA maintain insurance coverage, such insurance may not continue to be offered on an economically feasible basis and may not cover all events that could give rise to a loss or claim involving the assets or operations of Iberdrola USA’s subsidiaries. For example, Iberdrola Renewables currently has 409 megawatts, or MW, of installed capacity in California subject to known earthquake risks and approximately 600 MW of installed capacity on the Texas Gulf Coast subject to known hurricane and windstorm risks. Further, while insurance coverage applies to property damages and business interruptions, this coverage is limited as a result of severe insurance market restrictions and Iberdrola USA is generally not fully insured against all significant losses. In addition, Iberdrola USA’s subsidiaries’ insurance policies are subject to annual review by its insurers. The ability of Iberdrola USA to obtain insurance and the terms of any available insurance coverage could be materially adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers. If insurance coverage is not available or obtainable on acceptable terms, Iberdrola USA may be required to pay costs associated with adverse future events. If an operating subsidiary of Iberdrola USA were to incur a serious uninsured loss or a loss significantly exceeding the limits of its insurance policies, the results could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Furthermore, Iberdrola Networks’ gas distribution activities and Iberdrola Energy Holdings’ natural gas storage activities involve a variety of inherent hazards and operating risks, such as leaks, accidents, explosions, and mechanical problems and could result in serious injury to employees and non-employees, loss of human life, significant damage to property, environmental pollution and impairment of Iberdrola USA’s subsidiaries’ operations. In accordance with customary industry practice, Iberdrola USA’s subsidiaries maintain insurance

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against some, but not all, of these risks and losses. The location of natural gas pipelines and natural gas storage facilities near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages that could potentially result from these risks. The occurrence of any of these events not fully covered by insurance could adversely affect Iberdrola USA’s business, results of operations, financial position and cash flows.

The benefits of any warranties provided by the suppliers of equipment for Iberdrola Networks and Iberdrola Renewables’ projects may be limited by the ability of a supplier to satisfy its warranty obligations, or if the term of the warranty has expired or has liability limits.

Iberdrola Networks and Iberdrola Renewables expect to benefit from various warranties, including product quality and performance warranties, provided by suppliers in connection with the purchase of equipment. The suppliers of Iberdrola USA’s operating subsidiaries may fail to fulfill their warranty obligations or a particular defect may not be covered by a warranty. Even if a supplier fulfills its obligations, the warranty may not be sufficient to compensate the operating subsidiary for all of its losses. In addition, these warranties generally expire within two to five years after the date each equipment item is delivered or commissioned and are subject to liability limits. If installation is delayed, the operating subsidiaries may lose all or a portion of the benefit of a warranty. If Iberdrola Networks or Iberdrola Renewables seeks warranty protection and a supplier is unable or unwilling to perform its warranty obligations, whether as a result of its financial condition or otherwise, or if the term of the warranty has expired or a liability limit has been reached, there may be a reduction or loss of warranty protection for the affected equipment, which could have a material adverse effect on Iberdrola USA’s business, results of operation, financial condition and cash flows.

A disruption in the wholesale energy markets or failure by an energy supplier could adversely affect Iberdrola USA.

Almost all the electricity and gas Iberdrola Networks sells to full-service customers is purchased through the wholesale energy markets or pursuant to contracts with energy suppliers. A disruption in the wholesale energy markets or a failure on the part of energy suppliers or operators of energy delivery systems that connect to Iberdrola Networks’ energy facilities could adversely affect Iberdrola Networks’ ability to meet its customers’ energy needs and adversely affect Iberdrola USA.

The increased cost of purchasing natural gas during periods in which natural gas prices are rising significantly could adversely impact Iberdrola USA’s earnings and cash flow.

The rates that are permitted to be charged by Iberdrola USA’s regulated utilities that allow for rate recovery generally allow such businesses to recover their cost of purchasing natural gas. In general, the various regulatory agencies allow Iberdrola USA’s regulated utilities to recover the costs of natural gas purchased for customers on a dollar-for-dollar basis (in the absence of disallowances), without a profit component. Iberdrola Networks’ regulated utilities periodically adjust customer rates for increases and decreases in the cost of gas purchased by Iberdrola Networks’ regulated utilities for sale to its customers. Under the regulatory body-approved gas cost recovery pricing mechanisms, the gas commodity charge portion of gas rates charged to customers may be adjusted upward on a periodic basis. If the cost of purchasing natural gas increases and Iberdrola Networks’ regulated utilities is unable to recover these costs from its customers immediately, or at all, Iberdrola Networks may incur increased costs associated with higher working capital requirements. In addition, any increases in the cost of purchasing natural gas may result in higher customer bad debt expense for uncollectible accounts and reduced sales volume and related margins due to lower customer consumption.

Iberdrola Renewables owns, and in the future may acquire, certain projects in joint ventures, and such joint venture partners’ interests may conflict with Iberdrola USA and Iberdrola USA’s shareholders’ interests.

Iberdrola Renewables owns, and in the future may acquire, certain projects in joint ventures. For example, Iberdrola Renewables owns 50% of the Flat Rock Windpower LLC and Flat Rock Wind Power II LLC projects,

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which are jointly owned and operated with Horizon Wind Energy LLC. Iberdrola Renewables also owns 50% of Colorado Wind Ventures LLC in conjunction with Shell Wind Energy Inc. Under these structured institutional partnership investment arrangements, a variety of third-party institutional investors invest in the equity of a holding company that owns wind farm facilities. In return, the investors receive profit/loss, cash distributions and tax benefits resulting from the wind farm energy generation. In each of these cases, a non-controlling stake is offered and the company retains total control of the operations of the facilities.

In the future, Iberdrola Renewables may invest in other projects with a joint venture partner. Joint ventures inherently involve a lesser degree of control over business operations, which could result in an increase in the financial, legal, operational or compliance risks associated with a project, including, but not limited to, variances in accounting and internal control requirements. To the extent Iberdrola Renewables does not have a controlling interest in a project, Iberdrola Renewables’ joint venture partners could take actions that decrease the value of Iberdrola Renewables’ investment and lower its overall return. In addition, conflicts of interest may arise in the future between Iberdrola Renewables, Iberdrola USA and Iberdrola USA’s shareholders, on the one hand, and the joint venture partners of Iberdrola Renewables, on the other hand, where Iberdrola Renewables’ joint venture partners’ business interests are inconsistent with the interests of Iberdrola Renewables, Iberdrola USA and Iberdrola USA’s shareholders. Further, disagreements or disputes between Iberdrola Renewables and its joint venture partners could result in litigation, which could increase expenses and potentially limit the time and effort Iberdrola Renewables’ officers and directors are able to devote to its business, all of which could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Pension and post-retirement benefit plans could require significant future contributions to such plans.

Iberdrola USA provides defined benefit pension plans and other post-retirement benefits administered by Iberdrola USA’s subsidiaries for a significant number of employees, former employees and retirees. Financial market disruptions and significant declines in the market values of the investments held to meet the pension and post-retirement obligations, discount rate assumptions, participant demographics and increasing longevity, and changes in laws and regulations may require Iberdrola USA to make significant contributions to the plans. Large funding requirements or significant increases in expenses could adversely impact Iberdrola USA’s business, results of operations, financial condition and cash flows.

If Iberdrola USA and/or certain of its subsidiaries fail to maintain their credit ratings, Iberdrola USA’s cost of long-term debt and equity capital may increase and preclude access to the debt and equity capital markets.

Iberdrola USA, NYSEG, RG&E and CMP are parties to revolving credit facilities which contain facility fees and borrowing spread pricing that are a function of the credit rating of the borrower. A lower credit rating automatically increases the cost of these facilities. A downgrade to the lowest investment grade rating of the borrower would likely preclude access to the commercial paper market for NYSEG and CMP, which each have commercial paper programs. Lower credit ratings increase the cost of long-term debt and equity capital and, depending on the rating and market conditions, can preclude access to the debt and equity capital markets. Any of these events could have a materially adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola USA’s existing credit facilities contain, and agreements that Iberdrola USA may enter into in the future may contain, covenants that could restrict Iberdrola USA’s financial flexibility.

Iberdrola USA’s existing credit facilities, and the credit facilities of its subsidiaries, contain covenants imposing certain requirements on Iberdrola USA’s business including covenants regarding the ratio of indebtedness to total capitalization. Furthermore, Iberdrola USA’s subsidiaries periodically issue long-term debt, historically consisting of both secured and unsecured indebtedness. These third-party debt agreements also contain covenants, including covenants regarding the ratio of indebtedness to total capitalization. These requirements may limit the ability of Iberdrola USA and its subsidiaries to take advantage of potential business

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opportunities as they arise and may adversely affect the conduct of Iberdrola USA and its operating subsidiaries’ current business, including restricting Iberdrola USA’s ability to finance future operations and capital needs and limiting the subsidiaries’ ability to engage in other business activities. Other covenants place or could place restrictions on Iberdrola USA’s ability and the ability of Iberdrola USA’s operating subsidiaries to, among other things:

Agreements Iberdrola USA and its operating subsidiaries enter into in the future may also have similar or more restrictive covenants, especially if the general credit market deteriorates. A breach of any covenant in the existing credit facilities or the agreements governing Iberdrola USA’s other indebtedness would result in an event of default. Certain events of default may trigger automatic acceleration of payment of the underlying obligations or may trigger acceleration of payment if not remedied within a specified period. Events of default under one agreement may trigger events of default under other agreements, although Iberdrola USA’s regulated utilities are not subject to the risk of default of affiliates. Should payments become accelerated as the result of an event of default, the principal and interest on such borrowing would become due and payable immediately. If that should occur, Iberdrola USA may not be able to make all of the required payments or borrow sufficient funds to refinance the accelerated debt obligations. Even if new financing were then available, it may not be on terms that are acceptable to Iberdrola USA. For more information, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Iberdrola USA—Liquidity and Capital Resources” beginning on page 162 of this proxy statement/prospectus.

Iberdrola USA may be unable to meet its financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay dividends or repay loans from Iberdrola USA.

Iberdrola USA is a holding company and, as such, has no revenue-generating operations of its own. Iberdrola USA is dependent on dividends and the repayment of loans from its subsidiaries and on external financings to provide the cash that is necessary to make future investments, service debt incurred by Iberdrola USA, pay administrative costs and pay dividends. Iberdrola USA’s subsidiaries are separate legal entities and have no independent obligation to pay dividends to Iberdrola USA. Prior to paying dividends to Iberdrola USA, the subsidiaries have financial obligations that must be satisfied, including among others, their operating expenses and obligations to creditors. Furthermore, Iberdrola USA’s regulated utilities are required by regulation to maintain a minimum equity-to-total capital ratio that may restrict their ability to pay dividends to Iberdrola USA or may require that Iberdrola USA contribute capital. The future enactment of laws or regulations may prohibit or further restrict the ability of Iberdrola USA’s subsidiaries to pay upstream dividends or to repay funds. In addition, in the event of a subsidiary’s liquidation or reorganization, Iberdrola USA’s right to participate in a distribution of assets is subject to the prior claims of the subsidiary’s creditors. As a result, Iberdrola USA’s ability to pay dividends on its common stock and meet its financial obligations are reliant on the ability of Iberdrola USA’s subsidiaries to generate sustained earnings and cash flows and pay dividends to and repay loans from Iberdrola USA.

Iberdrola USA’s investments and cash balances are subject to the risk of loss.

Cash balances at Iberdrola USA and its subsidiaries may be deposited in banks, may be invested in liquid securities such as commercial paper or money market funds or may be deposited in a cash pool account in which Iberdrola USA is a participant along with other affiliates of the group of companies controlled by Iberdrola, S.A., or the Iberdrola Group. Bank deposits in excess of federal deposit insurance limits would be subject to risks in

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the counter-party bank. Liquid securities and money market funds are subject to loss of principal, more likely in an adverse market situation, and to the risk of illiquidity. Moreover, under the cash pool agreement governing the cash pool account mentioned above, credit balances in the cash pool account are pledged as collateral for the debit balances of other cash pool participants. Iberdrola USA is therefore subject to the credit risk of the affiliated parties to the cash pool agreement and to Iberdrola, S.A.’s ability to manage the overall liquidity of the Iberdrola Group.

Iberdrola USA and its subsidiaries may suffer the loss of key personnel or the inability to hire and retain qualified employees.

The operations of Iberdrola USA’s operating subsidiaries depend on the continued efforts of Iberdrola USA’s and its subsidiaries’ employees. Retaining key employees and maintaining the ability to attract new employees are important to Iberdrola USA’s financial performance and for its subsidiaries’ operations and financial performance. Iberdrola USA cannot guarantee that any member of Iberdrola USA’s or of its subsidiaries’ management will continue to serve in any capacity for any particular period of time. In addition, a significant portion of Iberdrola USA and its subsidiaries’ workforce, including many workers with specialized skills maintaining and servicing the electrical infrastructure, will be eligible to retire over the next five to ten years. Such highly skilled individuals cannot be quickly replaced due to the technically complex work they perform. Iberdrola USA and its subsidiaries cannot predict the impact of these plans on the ability to hire and retain key employees.

Iberdrola USA and its subsidiaries face the risk of strikes, work stoppages or an inability to negotiate future collective bargaining agreements on commercially reasonable terms.

A majority of the employees at Iberdrola Networks’ facilities are subject to collective bargaining agreements with various unions. Additionally, unionization activities, including votes for union certification, could occur among non-union employees. If union employees strike, participate in a work stoppage or slowdown or engage in other forms of labor strike or disruption, Iberdrola USA’s subsidiaries could experience reduced power generation or outages if replacement labor is not procured. The ability to procure such replacement labor is uncertain, though risks are reduced by rigorous contingency planning. Strikes, work stoppages or an inability to negotiate future collective bargaining agreements on commercially reasonable terms could have a material adverse effect on Iberdrola USA’s business, results of operations, financial condition and cash flows.

Changes in tax laws, as well as judgments and estimates used in the determination of tax-related asset and liability amounts, could materially adversely affect Iberdrola USA’s business, results of operations, financial condition and cash flows.

Iberdrola USA’s provision for income taxes and reporting of tax-related assets and liabilities require significant judgments and the use of estimates. Amounts of tax-related assets and liabilities involve judgments and estimates of the timing and probability of recognition of income, deductions and tax credits, including, but not limited to, estimates for potential adverse outcomes regarding tax positions that have been taken and the ability to utilize tax benefit carryforwards, such as net operating loss and tax credit carryforwards. Actual income taxes could vary significantly from estimated amounts due to the future impacts of, among other things, changes in tax laws, regulations and interpretations, the financial condition and results of operations of Iberdrola USA, and the resolution of audit issues raised by taxing authorities. Ultimate resolution of income tax matters may result in material adjustments to tax-related assets and liabilities, which could materially adversely affect Iberdrola USA’s business, results of operations, financial conditions and cash flows.

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Risks Relating to Investing in and Ownership of Common Stock of the Combined Company

There has been no public market for Iberdrola USA common stock and the lack of a public market makes it difficult to determine the fair market value of Iberdrola USA. The market price of the common stock of the combined company following the consummation of the merger could be volatile and UIL shareowners could lose all or part of their investment.

The outstanding capital stock of Iberdrola USA is privately held and is not traded on any public market. As a result, no public market price is available to UIL shareowners for use in determining the value of the common stock of the combined company they are entitled to receive as merger consideration. The value ascribed to Iberdrola USA’s securities in other contexts may not be indicative of the price at which Iberdrola USA common stock may have traded if it were traded on a public market. The merger consideration to be paid to UIL shareowners was determined based on negotiations between the parties and likewise may not be indicative of the price at which Iberdrola USA common stock may have traded if it were traded on a public market. The merger consideration to be paid to UIL shareowners will not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of the combined company common stock following the consummation of the merger. In addition, the market price of the common stock of the combined company following the consummation of the merger may be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond Iberdrola USA’s control.

UIL shareowners cannot be sure that an active trading market will develop or be sustained for the shares of the combined company common stock they will receive. The trading volume of the combined company common stock may be volatile, and holders of the combined company common stock may not be able to sell their shares following the merger.

Iberdrola USA does not have any class of securities publicly traded or listed in the United States or elsewhere and, accordingly, public information about it and its businesses or operations has been limited. Iberdrola USA has agreed to use its reasonable best efforts to cause the shares of the combined company common stock to be issued in the proposed merger to be approved for listing on the New York Stock Exchange, or NYSE, prior to the effective time of the proposed merger, and authorization for listing on the NYSE of the combined company common stock to be issued in the proposed merger is a condition to the completion of the proposed merger. The listing of shares on the NYSE does not assure that a market for the common stock of the combined company will develop or be sustained. No assurance can be provided as to the demand for or trading price of the combined company common stock following the completion of the proposed merger and the combined company common stock may trade at a price less than the current market price of UIL common stock.

The trading price of and demand for the common stock of the combined company following completion of the proposed merger and the development and continued existence of a market and favorable price for the common stock of the combined company will depend on a number of conditions, including:

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These and other factors may impair the development or sustainability of a liquid market for the common stock of the combined company and the ability of investors to sell shares at an attractive price. These factors also could cause the market price and demand for the combined company common stock to fluctuate substantially, which may negatively affect the price and liquidity of the combined company common stock. Many of these factors and conditions are beyond the control of the combined company or the shareholders of the combined company.

Future sales or issuances of the combined company common stock, including sales by Iberdrola, S.A., could have a negative impact on the combined company’s stock price.

Upon completion of the proposed merger, Iberdrola, S.A., the parent company of Iberdrola USA, will own 81.5% of the combined company’s common stock. Sales of common stock of the combined company by Iberdrola, S.A. or the perception that sales may be made by it could significantly reduce the market price of the combined company common stock. Pursuant to the merger agreement, the combined company and Iberdrola, S.A. will become parties to a shareholder agreement pursuant to which Iberdrola, S.A. will be generally restricted from transferring shares of the combined company common stock for a period of 18 months after the completion of the proposed merger, except that after 12 months following the completion of the proposed merger, Iberdrola, S.A. will be generally permitted to transfer its shares of the combined company common stock if a committee of “independent” directors (as defined in the shareholder agreement), or the unaffiliated committee, has approved the transfer after having received the advice of a nationally recognized independent investment banking firm. Under the shareholder agreement, a director will be considered “independent” if he or she is independent under the rules of NYSE with respect to the combined company, and would be independent under the rules of NYSE with respect to Iberdrola, S.A. if he or she was a director of Iberdrola, S.A. Iberdrola, S.A. will also be restricted, for a period of three years after the completion of the proposed merger, from transferring more than an aggregate of 10% of the outstanding shares of the combined company common stock in any transaction or series of transactions, unless all shareowners of the combined company are entitled to participate in such transaction (on a pro rata basis) and are entitled to the same per share consideration to be received in such transaction as Iberdrola, S.A. In addition, even if Iberdrola, S.A. does not sell a large number of its shares of the combined company common stock into the market, its right to transfer such shares may depress the stock price of the combined company common stock. Furthermore, pursuant to the shareholder agreement and subject to the terms and conditions therein, Iberdrola, S.A. will be entitled to registration rights of its combined company common stock. These registration rights will include the right to choose the method by which the shares of common stock are distributed, a choice as to the underwriter and registration rights in conjunction with other registered offerings by the combined company. Expenses incident to the combined company’s performance of or compliance with a demand registration made by Iberdrola, S.A. will be borne by the combined company. Iberdrola, S.A. will also retain preemptive rights to protect against dilution in connection with issuances of equity by the combined company. If Iberdrola, S.A. exercises its registration rights and/or its preemptive rights, the market price of shares of the combined company common stock may be adversely affected.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the combined company or its businesses, its common stock price and trading volume could decline.

The trading market for the common stock of the combined company will depend in part on the research and reports that securities or industry analysts publish about the combined company or its businesses. While securities and industry analysts currently cover Iberdrola, S.A., securities and industry analysts do not currently cover Iberdrola USA, and may never publish research on the combined company. If no securities or industry

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analysts commence coverage of the combined company, the trading price for its common stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover the combined company downgrade its securities or publish inaccurate or unfavorable research about its businesses, its stock price would likely decline. If one or more of these analysts cease coverage of the combined company or fail to publish reports on the combined company regularly, demand for its common stock could decrease, which might cause its common stock price and trading volume to decline.

Iberdrola, S.A. will exercise significant influence over the combined company, and its interests in the combined company may be different than yours.

Upon the completion of the proposed merger, Iberdrola, S.A. will beneficially own 81.5% of the outstanding common stock of the combined company. Accordingly, Iberdrola, S.A. will be able to exercise significant influence over the combined company’s business policies and affairs, including the composition of the combined company’s board of directors and any action requiring the approval of the combined company’s shareholders, including the adoption of amendments to the certificate of incorporation and bylaws and the approval of a merger or sale of substantially all of the combined company’s assets, subject to applicable law and the limitations set forth in the shareholder agreement. The directors designated by Iberdrola, S.A. will have significant authority to effect decisions affecting the capital structure of the combined company, including the issuance of additional capital stock, incurrence of additional indebtedness, the implementation of stock repurchase programs and the decision of whether or not to declare dividends.

The interests of Iberdrola, S.A. may conflict with the interests of other shareholders of the combined company. For example, Iberdrola, S.A. may support certain long-term strategies or objectives for the combined company that may not be accretive to shareholders in the short term. The concentration of ownership may also delay, defer or even prevent a change in control of the combined company, even if such a change in control would benefit the combined company’s other shareholders, and may make some transactions more difficult or impossible without the support of Iberdrola, S.A. This significant concentration of share ownership may adversely affect the trading price for the common stock of the combined company because investors may perceive disadvantages in owning stock in companies with shareholders who own significant percentages of a company’s outstanding stock.

The combined company will be a “controlled company” within the meaning of the rules of the NYSE and, as a result, will qualify for, and intends to initially rely on, exemptions from certain corporate governance requirements.

In addition to the consequences of the concentration of share ownership and possible conflicts between the interests of Iberdrola, S.A., and your interests discussed above, the combined company will initially be a “controlled company” within the meaning of the rules of the NYSE. Under these rules, a company in which over 50% of the voting power is held by an individual, a group or another company is a “controlled company” and is not required to have:

Following the proposed merger, the combined company intends to rely on these exemptions. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE without regard to the exemptions available for “controlled companies,” and the combined company’s initial status as a “controlled company” may adversely affect the

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trading price for the combined company common stock. For more information, see the section entitled “Additional Information About Iberdrola USA—Iberdrola USA Directors and Executive Officers” beginning on page 219 of this proxy statement/prospectus.

The rights of UIL shareowners who become shareholders of the combined company in the proposed merger will be governed by the combined company’s restated certificate of incorporation and the combined company amended and restated bylaws.

UIL shareowners who receive shares of common stock of the combined company in the proposed merger will become shareholders of the combined company and their rights as shareholders will be governed by the combined company’s restated certificate of incorporation and amended and restated bylaws, rather than UIL’s certificate of incorporation and bylaws. There may be material differences between the current rights of UIL shareowners, as compared to the rights they will have as shareholders of the combined company. For more information, see the section entitled “Comparison of Shareholder Rights Before and After the Merger” beginning on page 257 of this proxy statement/prospectus.

The combined company’s dividend policy is subject to the discretion of its board of directors and may be limited by the combined company’s debt agreements and limitations under New York law.

Although it is currently anticipated that the combined company will pay a regular quarterly dividend following the closing of the merger, any such determination to pay dividends will be at the discretion of its board of directors and will be dependent on then-existing conditions, including the company’s financial condition, earnings, legal requirements, including limitations under New York law, restrictions in the combined company’s debt agreements that limit its ability to pay dividends to shareholders and other factors the board of directors deems relevant. The board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. For these reasons, you will not be able to rely on dividends to receive a return on your investment. Accordingly, realization of a gain on your shares of the combined company common stock received in the merger may depend on the appreciation of the price of the combined company common stock, which may never occur.

Upon the completion of the proposed merger, the combined company will become a public reporting company subject to financial reporting and other requirements.

Upon the completion of the proposed merger, as a public company, the combined company will become subject to reporting, disclosure control and other obligations under the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, or SOX, the Dodd-Frank Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE. The combined company’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. As a result, the combined company will incur higher legal, accounting and other expenses than before, and these expenses may increase even more in the future. For example, Section 404 of SOX requires annual management assessment of the effectiveness of internal controls over financial reporting and a report by the combined company’s independent registered public accounting firm addressing these assessments. If the combined company is unable to implement its compliance initiatives in a timely and effective fashion, its ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired.

In addition, Iberdrola USA cannot assure you that there will not be material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit the combined company’s ability to accurately report its cash flows, results of operations or financial condition. If the combined company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public accounting firm determines the combined company has a material weakness or significant deficiency in its internal control over financial reporting, the combined company could lose investor confidence in the accuracy and completeness of its

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financial reports, the market price of its common stock could decline, and the combined company could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities. Failure to remedy any material weakness in the combined company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the capital markets and reduce or eliminate the trading market for the combined company common stock.

The financial performance, and price of the common stock, of the combined company may be affected by factors different from those that historically have affected UIL.

Upon completion of the proposed merger, holders of UIL common stock will become holders of common stock of the combined company. The businesses and target markets of Iberdrola USA differ from those of UIL, and accordingly the results of operations and the price of the common stock of the combined company will be affected by some factors that are different from those currently affecting the results of operations and stock price of UIL. For a discussion of the business of Iberdrola USA and of some important factors to consider in connection with Iberdrola USA’s business, see the section entitled “Additional Information about Iberdrola USA” beginning on page 191 of this proxy statement/prospectus.

Risks Relating to UIL’s Business and Operations

You should read and consider risk factors specific to UIL’s business and operations, which will also affect the combined company. These risks are described in the section entitled “Risk Factors” in UIL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, and in other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find Additional Information” beginning on page 275 of this proxy statement/prospectus for the location of information incorporated by reference into this proxy statement/prospectus.

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