Iberdrola accepts regulatory conditions to Energy East merger, expects transaction to close within one week

By Jennifer Lanning Drey

Portland, Ore., Sept. 11 - Iberdrola SA accepted the conditions required by the New York State Public Service Commission for the company to complete its proposed merger with Energy East Corp., Iberdrola announced Thursday.

"These conditions allow us to maintain what we announced in the very beginning of the transaction, which is a transaction to remain accretive from an earnings-per-share point of view and to remain accretive from a cash-flow-per-share point of view," Pedro Azagra, Iberdrola's director of development, said during a conference call held to discuss the announcement.

The transaction is expected to close within a week, Azagra said.

Iberdrola believes the transaction will positively impact its earnings per share and cash flow per share within its first year, he said.

Additionally, Iberdrola expects to maintain financial leverage below 50% following the transaction, José Luis del Valle, chief strategy and development officer of Iberdrola, said during the call.

"We're quite confident that we'll keep an excellent liquidity position by the end of 2008 with over €4 billion," he said.

During the question-and-answer portion of the call, Iberdrola's chief financial officer, José Sainz Armada, said the company would consider returning to the bond market later this year.

Conditions to approval

As previously reported, the New York State Public Service Commission approved the acquisition on Sept. 3 with stipulations including a requirement that Energy East affiliates New York State Electric and Gas Corp. and Rochester Gas and Electric Corp. provide $275 million in benefits to gas and electric customers either by reduced rates or smaller increases.

The two utilities will also be required to maintain current levels of planned capital investment.

Iberdrola will be allowed to own wind generation, but with conditions to prevent it from exerting "vertical market power." In addition, it will be required to invest a further $100 million in wind generation on top of the $100 million already committed.

Iberdrola's offer to divest fossil fuel plants was accepted.

"All in all, for the final acquisition price of about €3.2 billion, we are getting a strong contribution in terms of operational data, in terms of financial data and especially in terms of geographical diversification," del Valle said.

Energy East is a utility company based in New Gloucester, Maine, and Iberdrola is a utility located in Bilbao, Spain.

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