Energy East (EAS) Could Be Acquired by Iberdrola

Photo: -Marlith-, Creative Commons, Flickr
Iberdrola (IBE.MC), the wind energy giant from Spain, has been trying to buy Energy East (EAS) since June 2007. However, it has run up against hurdles as different public service commissions in the states that would be serviced by the new arrangement put the deal up for a vote. Now, though, the New York Public Service Commission has voted (4-0) to approve the acquisition — provided Iberdrola meets some fairly stiff demands:

  • $275 million must be set aside to offset future rate increases.
  • Iberdrola must invest $200 million into renewable energy projects in New York.
  • Sell of fossil fuel plants owned by Energy East.
  • Cannot use funds from Energy East subsidiaries to invest in wind energy.

Iberdrola has decided to consider the conditions before moving forward on a deal; conditions that are not as onerous as they could have been. The Street reports on what the Commission’s staff recommended regarding the deal:

The commission’s staff had recommended against the acquisition, citing concerns about creating a too-powerful utility and protecting consumers’ interest. The staff also recommended forcing Iberdrola to sell its wind farms and hydropower plants because of a state policy that prohibits companies from owning power-generating plants and transmission lines.

If Iberdrola accepts the conditions, it could mean $200 million in "new" money to help invigorate renewable energy in New York. Selling off the fossil fuel plants might also set a good precedent, although someone else would just buy and use them. But it could provide new capital for further investment in renewable energy. I do worry that some of the conditions may offset what is obviously meant as an attempt by the Commission to do some real good.

It is kind of harsh that Iberdrola can’t use some of their gains to invest in wind energy (which is the company’s expertise), but it could lead to development of other alternative energy sources. This might be helpful because we are at a point where only one main energy source isn’t going to cut it anymore. Just wind won’t cut and neither will just solar. There are promising sources of renewable and alternative energy out there — including tides and geothermal — and we should be concentrating on developing a more diverse and sustainable energy economy.

Disclosure: I do not own any stocks listed above.

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