Sunday, December 2, 2007

Iberdrola sees US acquisition as platform for wind

New York, 28 June: Iberdrola is to acquire US utility Energy East, in a move that the Spanish energy giant says will underpin an expansion into the US renewables market.

On Monday, Bilbao-based Iberdrola agreed to acquire Albany, New York-based Energy East, in a friendly transaction, for €3.4 billion ($4.5 billion) and the assumption of €3 billion in debt. US and state regulators must approve the deal, which the companies expect to close by mid-2008.

Iberdrola already owns more than 17,500 MW of renewable generating capacity, including large-scale hydro, and has acquired some US wind projects. But Energy East would give it a larger presence in the country.

Energy East owns utilities in New York and New England that operate mainly as distribution companies, owning little generation. But with its steady utility revenues, Energy East will become "a platform for further growth in the US," said José Luis del Valle, Iberdrola's director of strategy and development. There is strong support for wind in the US, he said, from federal tax benefits and state Renewable Portfolio Standards that require utilities to obtain a percentage of their power from renewables.

Strong drivers are the Production Tax Credit (PTC), which provides 1.9 cents/kWh for renewables, and accelerated depreciation for equipment. But companies may only claim the credits if they have taxable US income, which Iberdrola would gain in Energy East.

"The profitability of wind energy can only be maximised by taking advantage of the tax credits," said Iberdrola CEO Ignacio Galan, during the webcast. The Energy East acquisition will "enable tax optimisation of Iberdrola's renewables business in the US".

Iberdrola obtained 1,600MW of operating or planned US wind farms when it acquired Scottish Power and its PPM Energy subsidiary in April. That same month, it bought CPV Wind Ventures, with 3,500MW in development.

These deals followed Iberdrola's 2006 purchase of Community Energy, which is developing 2,000MW of wind and which markets green energy. Iberdrola will also gain up to 1,000MW of US wind farms to be built by Spanish turbine manufacturer Gamesa. And it signed a contract to buy 2,700MW of Gamesa turbines – an advantage in a market where turbine shortages have hampered some developers.

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