Spanish-based powerhouse Iberdrola SA agreed last week to acquire Portland, ME-based utility Energy East for an estimated $4.5 billion. The New England utility serves 1.8 million electricity customers and 900,000 natural gas customers along the East Coast in Maine, New Hampshire, Massachusetts, Connecticut and New York.

With the Energy East transaction, the enterprise value of Iberdrola would surpass $112 billion (83,000 million euros), and it would become one of the world’s largest electricity operators. The acquisition would give Iberdrola 24 million electricity points of supply, 3.0 million gas points of supply, and an installed capacity of nearly 42,000 MW.

“This new step in the United States will allow Iberdrola to continue working with national and state governments to make investments in infrastructure that advance clean energy policies,” said Iberdrola CEO Ignacio Galan. “We welcome Energy East’s employees and look forward to leveraging our experience to help address some of the most challenging energy and environmental issues in the northeastern U.S.”

Once the transaction closes, Energy East’s utility subsidiaries would continue to operate under their current names: The Berkshire Gas Co., Central Maine Power Co., Connecticut Natural Gas Corp., New York State Electric & Gas Corp., Rochester Gas and Electric Corp. and The Southern Connecticut Gas Co.

Energy East CEO Wes von Schack said he wanted to assure Energy East’s customers that they could continue to rely on the “same local people” once the transaction closes.

“The energy industry is at a major inflection point,” said von Schack. “Policymakers now recognize the need for our industry to make significant investments in our energy infrastructure. Our objective is to team with the states in which we do business to help meet the goals they have established to increase renewable sources of energy, improve energy efficiency, and invest in a secure and reliable energy infrastructure. We believe our combination with Iberdrola will not only accelerate our progress but will transform the way we do business.”

According to the terms of the merger agreement, Energy East shareholders would receive $28.50/share in cash, which is a 20.2% premium over Energy East’s average closing stock price for the 30-day period ending last Friday. The transaction values Energy East at about $8.6 billion (6,400 million euros) in enterprise value. The transaction is subject to approval by the shareholders of Energy East and federal and state authorities.

Iberdrola, which has expanded its renewables portfolio with some strategic purchases in recent years, expects to support Energy East’s efforts by expanding its wind generation portfolio, which includes the New York-based Maple Ridge wind generating facility — the largest such facility on the East Coast.

Globally, Iberdrola has 16,500 MW of installed renewable energy capacity. Last year it increased its presence in the United States with the purchase of Glasgow, Scotland-based ScottishPower plc for $22.5 billion (see NGI, May 14). In addition, Iberdrola has 2.7 billion cubic meters of gas storage capacity in the United Kingdom and the United States.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.