UPDATE 1-Iberdrola to buy Energy East for $4.5 billion

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PHILADELPHIA, June 25 (Reuters) - Spain's Iberdrola SA said on Monday it would acquire Energy East Corp. EAS.N for $4.5 billion, increasing its presence in the United States as it expands internationally.

Iberdrola said it would pay $28.50 per share in cash for Energy East, an electricity and natural gas company in the northeastern United States. The deal marks a 26-percent premium over Energy East's closing stock price on Monday of $22.54 per share on the New York Stock Exchange.

Iberdrola, which recently completed the $23 billion acquisition of Scottish Power, said last week it viewed the United States as one of the best opportunities for growth. It cited the strong growth potential and favorable tax benefits for wind power development.

Iberdrola, which already has a wind power development pipeline in the United States, said it would explore opportunities to expand Energy East's wind generation portfolio.

Iberdrola said it would weigh different financing options for the deal, which is expected to close in 2008.

Energy East has 1.8 million electricity customers and 0.9 million natural gas customers. Following the purchase by Iberdrola, Energy East's utilities will continue to operate under their current names: Berkshire Gas Co., Central Maine Power Co., Connecticut Natural Gas Corp., New York State Electric & Gas Corp., Rochester Gas and Electric Corp., and Southern Connecticut Gas Co.