Iberdrola SA, the Spanish power company that acquired Scottish Power Plc earlier this year, agreed to buy Energy East Corp. for $4.5 billion, fulfilling its ambition of gaining a foothold in the U.S. utility industry.
Energy East shareholders will get $28.50 in cash per share, the companies said today in a joint statement. That's 26 percent more than the $22.54 closing price in New York today for Portland, Maine-based Energy East.
Iberdrola, based in Bilboa, Spain, has sought more assets in the U.S. and investments in renewable energy since its 12 billion pound ($24 billion) purchase of Scottish Power in April. European utilities are expanding overseas because of increasing competition in their home markets, said Amin Bishara, global sector leader for utilities at consultant Capgemini in Dallas.
``Energy East is in a good geographic location and can help Iberdrola establish a foundation to grow further in the U.S.,'' Bishara said. ``The next wave'' of acquisitions in the utility industry ``is going to be the big European companies buying assets in the U.S.,'' he said.
Other European utilities that have expanded in the U.S. through acquisitions include National Grid Plc of the U.K., which owns utilities in New York and Massachusetts and is working on a $7.3 billion takeover of Brooklyn-based KeySpan Corp., the largest natural-gas distributor in the Northeast.
Capacity Increase
Energy East has 2.9 million customers and owns U.S. Northeast utilities including New York State Electric & Gas, Central Maine Power and Rochester Gas & Electric.
Energy East's utilities primarily distribute and transmit electricity and transport, store and distribute natural gas. The company owns hydroelectric generating plants, natural-gas fired plants and one coal generator with a combined capacity of 555 megawatts, according to its most recent annual report.
Energy East also owns the Seneca Lake Natural Gas Storage Facility, which can hold 1.4 billion cubic feet of gas.
Buying Energy East ``will serve to enhance the international expansion we initiated several years ago in markets with stable growth,'' Iberdrola Chief Executive Officer Ignacio Galan said in the statement.
Tax Incentives
Iberdrola, the biggest producer of electricity from windmills, also said the acquisition will help the company reap tax savings tied to U.S. government incentives for wind power. The company had 4,500 megawatts of wind power at the end of the first quarter and its purchase of Scottish Power made it the second-largest wind-power producer in the U.S.
``Iberdrola has really made known its intention to diversify into the United States,'' said Carl Seligson, a senior vice president with consultant Nyack Management Co. in New York.
Iberdrola, which also owns power plants in Brazil and Mexico, has been buying U.S. wind-power developers. The company in April agreed to purchase Maryland-based CPV Wind Ventures LLC and said it would invest 1.5 billion euros ($2 billion) to develop wind energy in the U.S.
The Scottish Power acquisition added about 5.2 million customers and 6,200 megawatts of power-generation capacity in Britain, including two wind-turbine farms.
source:bloomberg.com
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