Iberdrola Becomes Third Renewable Operator In The US With €3.7 Bn Purchase Of PNM Resources


Avangrid, which is 81.5% controlled by Iberdrola, has announced the acquisition of PNM Resources, Inc. The latter’s shares are listed on the New York Stock Exchange. The US electricity firm is based in the State of New Mexico, operating regulated businesses, mainly in the transmission, distribution and generation of electricity in the States of New Mexico and Texas.

The transaction, valued at $4,318M (€3.7 billion), is a friendly one recommended by PNM’s board of directors. The price represents a 10% premium over Tuesday’s market price and 19.3% over PNM’s average share price during the 30 days prior to Wednesday, October 21st. The enterprise value of the operation, including debt, is approximately 8.3 billion dollars (7 billion euros).

Iberdrola’s idea is to merge the two companies to bring together their interests in the US. The combination of Avangrid and PNM creates approximately 4.1 million supply points, a regulated asset base of around $14.4 billion, over 168,000 km of distribution and transport networks and approximately 10.9 gigawatts of installed capacity. All this will allow the Spanish energy group to accelerate its growth in the US.

So the integration of PNM Resources into Avangrid will give rise to one of the largest companies in the US sector, with 10 regulated electricity companies in 6 states (New York, Connecticut, Maine, Massachusetts, New Mexico and Texas). It will also be the third largest renewable energy operator in the country with a total presence in 24 states.
The combined company will have assets in excess of $40 billion, have approximately $2.5 billion of EBITDA and a net profit of $850 million.

For the time being, the operation is conditional on, firstly, the approval by the General Shareholders Meeting and, secondly, the necessary regulatory authorizations by the relevant US federal and state authorities.The operation fits in with Iberdrola’s strategy of investing and growing internationally in renewables and networks. Its Strategic Plan includes investments of 34 billion euros in the period 2019-22.

For Bankinter’s analysis team, the operation will have a positive effect on Iberdrola’s EPS.

“Assuming a financing cost of 2%-3% for this operation, Iberdrola’s EPS would increase by 87M$ (74M euros), which would mean an additional 2.1% for the company.”

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