Iberdrola acquisition gives access to production tax credit

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Spain's Iberdrola is continuing its flurry of US acquisition activity with plans to buy Energy East, a regulated utility based in Portland, Maine. The $4.5 billion transaction, pending regulatory approval, is seen as an opportunity for Iberdrola to optimise access to wind power's federal production tax credit by gaining significant tax liabilities in the US. Energy East is primarily an energy transmission and distribution company, with involvement in wind power limited to offering customers wind generated electricity through Community Energy, a Pennsylvania project developer bought by Iberdrola in 2006. Energy East's Clay Ellis says the company does not yet own any wind generation, but chairman and CEO Wes von Schack is quoted by news media as saying that expansion into wind is one of the top goals of the acquisition. Energy East's six utility subsidiaries, with nearly three million customers, will continue to operate in New York, Maine, Massachusetts, Connecticut and New Hampshire under their current names: Berkshire Gas, Central Maine Power, Connecticut Natural Gas, New York State Electric & Gas, Rochester Gas and Electric and Southern Connecticut Gas. Iberdrola is now well positioned for wind power in their service territories -- particularly the promising New York market. Last year Iberdrola entered the North American market by snapping up small wind developers in Pennsylvania, Iowa and Virginia as well as acquiring the second-most prolific wind company in the US, PPM Energy, through its purchase of PPM parent, British ScottishPower.

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