Iberdrola Agrees to NY State Terms for Purchase of Energy East

Sep. 12, 2008 7:47 AM ETIBDRY, EAS
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By Ucilia Wang

Wind-energy giant Iberdrola (OTCPK:IBDRY) has agreed to the terms imposed by New York state regulators as conditions for it to buy Energy East (EAS).

The decision ends a more than year-long effort to buy the utility, which delivers electricity and gas to three million customers in upstate New York and four other northeastern states, including Massachusetts, Connecticut and Maine.

The Wednesday decision arrived a week after the New York Public Services Commission approved Iberdrola's plan to buy Energy East for about $4.5 billion in cash, subject to a series of conditions including the assumption of about $3.8 billion in debt.

The conditions also require Iberdrola to set aside $275 million as rebates to offset future rate increases, investing $200 million in wind energy in New York and selling off Energy East's fossil-fuel power plants in the state (see Ibrdrola Clears Last Hurdle to Buy Energy East).

Iberdrola faced stiff opposition from commission staff, which was concerned that the acquisition would create a too-power utility and hurt consumers.

The commission staff had sought to require Iberdrola to set aside $646 million for rebates. The staff also recommended forcing Iberdrola to sell its wind farms and hydropower plants because of a state policy that prohibits companies from owning power-generating plants and transmission lines. The commission decided to allow Iberdrola to keep the wind and hydropower plants.

The Spanish company first announced plans to buy Energy East in June last year. The purchase is part of Iberdrola's larger plan to expand its presence in the U.S. market.

In fact, after the Energy East deal is complete, Iberdrola will have $20 billion worth of assets in the country, the company said. Energy East shareholders, as well as other states in which Energy East operates, already had approved the acquisition before New York regulators voted last week.

In May, the company said it would invest $8 billion in renewable energy in the United States from 2008 to 2010, doubling its wind-energy capacity (see Funding Roundup: Spain's Iberdrola to $8B in U.S.).

By the end of the first quarter of 2008, Iberdrola's U.S. wind farms totaled a capacity of 2.4 gigawatts. The company said it planned to increase the capacity to 3.6 gigawatts by the end of this year.

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