Tuesday, May 25, 2010

Iberdrola Sells US Gas Businesses for $1.3 Billion

Due to sweeping market changes in the gas industry as well as overleveraged Spanish utility giant Iberdrola has divested its gas utility companies in favor of building another 3,000MW of wind farms in the US to capitalize on Obama's subsidis for green energy.....

Iberdrola said on Tuesday it had agreed the $1.3bn sale of three gas businesses in the US, marking the latest in a series of non-core asset divestments at Spain’s largest electricity group.

The world’s biggest wind energy generator said it would sell Connecticut Natural Gas Corporation, Southern Connecticut Gas Company and the Berkshire Gas Company to UIL Holdings Corporation, parent of electric utility The United Illuminating Company.

Iberdrola said the sales were part of an ongoing divestment programme aimed at cutting debt and concentrating on core businesses. They follow the recent sales of its 2.7 per cent stake in EDP of Portugal, 15.7 per cent holding in Petroceltic and Seneca Lake gas assets.

The gas distributors – all located on the US northeastern seaboard and claim between them nearly 370,000 clients and annual volume sales of 1.6bn cubic metres (bcm) – were part of Energy East, the US group for which Iberdrola paid $4.5bn in 2008.

The purchase will further allow the company to consolidate its position in the country, where it expects to benefit from grants from stimulus funding as a result of president Barack Obama’s support for low-carbon energy.

Proceeds from the sale will be used to finance a €1.4bn project to upgrade and extend transmission lines and substations covering the states of Massachusetts, New Hampshire, and Maine, with an improved link into Canada.

Ignacio Sánchez Galán, Iberdrola’s executive chairman, said this year that almost 40 per cent of the company’s €18 bn capital spending between 2010 and 2012 would go into the US; primarily into wind farms and electricity transmission and distribution.

Iberdrola is already the second-largest wind company in the US, with almost 3,600 megawatts of installed capacity at the end of last year, and plans to double that and build a further 1,000MW a year for the next three years.

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