September 10, 2008 / 6:48 AM / 11 years ago

UPDATE 3-Iberdrola accepts conditions on Energy East buy

(Recasts, adds Iberdrola’s acceptance of New York regulator’s conditions; changes byline)

By Sarah Morris

MADRID, Sept 10 (Reuters) - Spain’s Iberdrola (IBE.MC) on Wednesday accepted the conditions imposed by the New York state regulator on its $4.5 billion takeover of U.S. utility Energy East Corp EAS.N and said the deal would be completed in a few days.

“Today, Iberdrola has communicated its acceptance of the conditions to the New York State Public Service Commission (NYPSC),” the Spanish utility said in a statement to the Spanish stock exchange regulator Wednesday evening.

The NYPSC approval was the last hurdle for the deal, worth about $4.5 billion plus debt of about $3.8 billion.

Iberdrola said the takeover will transform the electricity company — which bought the UK’s Scottish Power in 2007 — into the fourth-largest in the world in terms of market capitalisation.

“This deal ... gives us an important platform to develop our growth in one of the key markets for the group: the United States,” Iberdrola Chairman Ignacio Galan said in a statement.

Energy East provides either electricity or natural gas to about 3 million customers is four states in the U.S. Northeast.

Iberdrola was informed of all the conditions imposed by the New York regulator on Tuesday night, later than expected, and has been studying them in detail.

The regulator imposed conditions such as $275 million in tariff reductions or adjustments, and a requirement for Energy East to divest fossil fuel generation.

Iberdrola shares hit a year low Wednesday on concern that its shareholders, including Spanish savings banks suffering during a sharp economic downturn, may sell their stakes.

“Some of Iberdrola’s shareholders are heavily exposed to Spain’s property market and could be forced to reduce their stakes in the company to shore up their capital base,” a Madrid-based trader said.

Iberdrola’s core shareholders include Spanish savings banks Bancaja and La Kutxa, each with about 6 percent of the company, as well as construction group and property developer ACS, with about 12 percent.

Observers said some traders also seemed to be selling Iberdrola because they felt the Energy East deal could lessen Iberdrola’s appeal to suitors.

The shares fell about 5 percent, then recovered a bit to close down 3.06 percent at 7.29 euros. (Reporting by Sarah Morris; editing by John Wallace)

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