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Iberdrola to acquire the rest of subsidiary Avangrid

Iberdrola to acquire the rest of subsidiary Avangrid
(Photo by Sasun Bughdaryan on Unsplash)

Spanish utility Iberdrola plans to acquire the remaining 18.4% stake in Avangrid, giving the company 100% ownership of its American subsidiary.

Iberdrola is acquiring the additional capital for $35.75 per share, according to a company announcement. The Avangrid Board of Directors has approved the transaction.

The $35.75 per share price represents a 11.4% premium over the closing price of Avangrid common stock on March 6, 2024, the last unaffected trading day prior to Avangrid’s announcement of receipt of Iberdrola’s unsolicited offer, and a 15.2% premium over the volume-weighted average price of Avangrid common stock over the 30 trading days leading up to the unaffected trading day.

Avangrid expects to continue paying regular quarterly cash dividends not to exceed $0.440 per share through the closing of the transaction, including a pro-rated dividend for any partial quarter prior to the closing. The transaction is expected to close in the fourth quarter of 2024, subject to closing conditions.

In March, Iberdola issued a non-binding “take-private” proposal to Avangrid to buy the remainder of its stock, of which it already owned 81.6%, for $34.25 per share coming to around $2.5 billion. Iberdrola said the objective of the transaction is to “increase exposure to the networks business in the United States at a key time for Iberdrola, which wants to grow in markets with high credit ratings and in regulated businesses such as networks.”

Headquartered in Connecticut, Avangrid currently has $44 billion in assets and operations in 24 U.S. states. Through its networks business, Avangrid owns and operates eight electric and natural gas companies, serving more than 3.3 million customers in New York and New England. Through its renewable energy business, Avangrid owns and operates a portfolio of renewable energy generation facilities throughout the United States. Today, the company has 8,000 employees.

The offer came after a bumpy year for Avangrid.

In January, Avangrid terminated a merger agreement with New Mexico’s largest utility, citing delays and lack of regulatory approval. Under the proposal, first announced in 2020, Avangrid would have acquired PNM Resources and its two utilities — Public Service Co. of New Mexico and Texas New Mexico Power. The all-cash transaction was valued at more than $4.3 billion and would have opened the door for Iberdrola and Avangrid in a state where more wind and solar power could be generated and exported to larger markets.

Last fall, Maine voters shot down a referendum that would have dismantled Central Maine Power, an Avangrid subsidiary, and Versant Power to create a nonprofit utility called Pine Tree Power to govern the grid.

The vote came amid intense criticism of Central Maine Power over its slow response to storm-related power outages, a botched billing system rollout, and perceived roadblocks to connecting renewable power projects to the grid, among other things.

In October 2023, Avangrid and Connecticut utilities agreed to terminate a long-term power purchase agreement for a Massachusetts offshore wind project citing economic conditions that left the project “unfinanceable,” according to the developer. Avangrid plans to rebid the 804 MW Park City Wind project, which had previously secured 20-year PPAs with Eversource Energy and United Illuminating. United Illuminating is an Avangrid subsidiary.

In July 2023, Avangrid agreed to pay $48 million to pull out of a PPA with Eversource Energy, National Grid, and Unitil for another offshore wind project, the 1,223 MW Commonwealth Wind located 20 miles south of Martha’s Vineyard.

The Board of Directors of Avangrid unanimously approved the agreement, which is subject to a number of customary conditions.

“We are excited about Iberdrola’s continued investment in Avangrid and commitment to the United States,” said Pedro Azagra, President and Chief Executive Officer of Avangrid. “As a wholly-owned member of the Iberdrola Group, we will continue to serve our customers and build our renewable energy assets work to achieve our vision to lead the clean energy transition with a strong commitment to sustainability, community, governance, and our employees.”

This article contains reporting from the Associated Press.

Originally published in POWERGRID International.

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