Iberdrola Wins Key Asset in Energy East [WSJ]
By KEITH JOHNSON and REBECCA SMITH
June 26, 2007; Page A2
Iberdrola SA's €3.4 billion ($4.58 billion) deal to purchase Energy East Corp. could further push the Spanish utility's aggressive expansion in the U.S., especially in renewable energy.
The deal, announced late yesterday, is Iberdrola's fifth U.S. acquisition in the past year and its first purchase of a regulated U.S. utility company. Energy East, of Portland, Maine, has about three million electric and gas customers in upstate New York, Maine, New Hampshire and Connecticut.
The acquisition, which requires regulatory approval from federal agencies and four states, is key to Iberdrola's ambition to create a giant international utility that Chief Executive Ignacio Galan said would take advantage of "key growth opportunities" in the U.S. The Energy East deal also will enable the Spanish utility to take advantage of U.S. production tax credits for renewable energy.
Most of Energy East's business is in energy transmission and distribution since it largely vacated power generation in the late 1990s. That could change because Energy East is interested in power-plant development. Michael McClain, senior vice president for Energy East, said his company is interested in combining with Iberdrola because it is "enthusiastic" about investing in infrastructure, especially renewable power. Mr. McClain said his group wanted to partner with a "progressive European utility that's ahead of us on climate-change issues."
New York Gov. Eliot Spitzer wants his state to achieve a 15% reduction in energy use by 2015, a goal that puts distribution utilities like Energy East in a pivotal position. It could benefit from increased spending on conservation programs by taking a program-management role.
Iberdrola, with a market capitalization of about €50 billion, will offer $28.50 for each Energy East share, a 20.2% premium over the average share price of the last 30 days. Iberdrola said in a press release that both company boards approved the deal yesterday. Energy East earned $259.8 million on revenue of $5.23 billion in 2006, essentially flat from earnings of $256.8 million on revenues of $5.3 billion in 2005. Assets, both years, were about $11.5 billion.
Approximately 84% of Iberdrola's power generation is considered zero emission, such as hydropower, or low emission, such as natural-gas-fueled. Iberdrola closed the purchase of Scottish Power PLC of the United Kingdom this spring, including its U.S. affiliate PPM Energy Inc., making it the world's largest generator of renewable energy, just ahead of FPL Group Inc., Juno Beach, Fla. As a result of that acquisition, it garnered the biggest wind farm in New York, the Maple Ridge development near Lake Ontario.
Many European companies, such as Energias de Portugal SA, are diving into the relatively underdeveloped U.S. renewable-energy market, but they can't take full advantage of U.S. regulation without a sizeable U.S. presence. |
