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Iberdrola rethinks US strategy
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Iberdola, the Spanish energy company that owns ScottishPower, said yesterday it will reconsider buying Energy East Corporation, a US power firm, if its ability to invest in renewable energy is restricted in the state of New York.
An Iberdrola spokesman said a judge’s recommendation against the $4.5bn purchase still meant that New York’s Public Services Commission (PSC) would have the final say.
“Even though we are still confident of a positive outcome from the PSC, if we cannot go ahead with the purchase of Energy East, Iberdrola will not change its objectives in the United States given various opportunities for investment in other states that it has already identified,” the spokesman said.
If the deal collapses it will free up about $6.4bn (about £3bn) for Iberdrola – the value of the Energy East deal when assumed debt is included.
On Monday, New York judge Rafael Epstein said the deal should be blocked because it is not in the public’s best interests but he said that if the transaction were to be approved it should be with certain conditions.
These would include prohibiting Iberdrola from owning electricity generating plants interconnected with Energy East’s transmission and distribution systems in New York and requiring the company to pay out nearly $650m of “positive benefit adjustments” for customers in New York.
Wall Street analysts have already said that the judge’s recommendation has diminished the likelihood of the deal being completed and Iberdrola has been playing down its importance for some time, saying it has other places where it can invest its money. City energy industry analysts said Iberdrola could look elsewhere in the United States or seek opportunities in Europe, particularly in the UK where the government raises few obstacles to foreign takeovers.
The company said it expects the New York PSC to hand down its decision next month after Iberdrola has had an opportunity to present more evidence.
Iberdrola raised the money for the Energy East deal through a share issue a year ago which raised 3.375bn (about £2bn at the time).
Iberdrola has been linked to a possible bid for British Energy, the Scottish-based nuclear generator, However, Iggnacio Sanchez Galan, Iberdrola’s chairman, told The Herald last week that the big electricity company was no longer interested in bidding for the East Kilbride-based nuclear generator.
While on a visit to New York City, Galan said: “The price is very far from what we consider possible.”
Douglas Hamilton
The Herald (UK)
18 June 2008
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