Iberdrola to buy Brazil's Elektro Electricidade for $2.38 bn

Iberdrola SA, Spain's largest power utility, today said that it would buy Brazil's Elektro Electricidade e Servicos SA from Ashmore Energy International (AEI) for €1.77 billion ($2.38 billion), to expand into growing markets.

Iberdrola will acquire the 99.68-per cent stake in Elektro Electricidade from AEI, the investment vehicle controlled by UK investment company Ashmore Group.

Elektro is one of the major electricity providers in Brazil, operating in Sao Paulo, where it is the third largest distributor, and Mato Grosso. It has 2.17 million customers supplying more than 11,000 GWh in 2009 through a network of 105,792km.

Bilbao-based Iberdrola, which already holds a 39-per cent stake in Neoenergia, another Brazilian utility, will become one of the largest electricity companies in Brazil with the acquisition of Elektro Electricidade.

Iberdrola plans to merge Elektro with Neoenergia. Both companies combined had pro forma 2009 sales of 14.42 billion Brazilian reals, and 25.9 million clients, making the combined entity one of the largest power companies in the growing Brazilian market.

The acquisition will be paid for in cash, underlining Iberdrola's financial strength and liquidity. Elektro has €369 million debt and in 2009 recorded Ebitda of €334 million with net earnings of €216 million.

The acquisition is fully consistent with Iberdrola's current strategy focused on overseas expansion in markets with high growth potential and regulatory stability such as the US, Brazil, the UK, Mexico, offering greater predictability regarding revenues and also low risk, said the Spanish utility in a statement.

This strategy has also been reflected in its divestment of non-strategic assets during 2010, including its US gas subsidiaries in Connecticut and Massachusetts and other assets in Chile and Guatemala.