PSC Staff Call for Iberdrola Divestiture of Wind Assets in Acquisition of Energy East

Iberdrola, the Spanish energy company, petitioned the New York PSC in August 2007 to acquire Energy East (the parent holding company of New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation). In an April 15, 2008 [http://www3.dps.state.ny.us/PSCWeb/PIOWeb.nsf/a89c0117705349e7852573e0007a0a57/32d59250bb5a08e48525742b00700a7e/$FILE/NYS%20Dept.%20of%20Public%20Service%20Staff’s%20Initial%20Brief.pdf] filing before the PSC, staff of the PSC stated that “Iberdrola’s ownership and development of wind generation is a detriment, and not a benefit of this [proposed] transaction.” Staff called on the PSC to reject the acquisition, but if it declined to do so, to compel Iberdrola to divest itself of the target’s generation (including wind) assets before permitting the acquisition.

Iberdrola, which touts itself as the world’s leading producer of electricity from wind energy, with approximately 7,000 MW of capacity installed, is a stakeholder in the Maple Ridge (or Flat Rock) wind generation facility. It has promised to invest (through its interest in Iberdrola Renewables) in excess of $100 million in wind energy in New York within the next three years if the deal is approved. Consistent with an Albany Times Union article [http://timesunion.com/AspStories/story.asp?storyID=681813&category=BUSINESS&BCCode=HOME&newsdate=4/18/2008], Iberdrola intends to “rethink” the deal if the PSC makes “unreasonable” demands.

Per press reports, NY Senator Charles Schumer sharply criticized the staff’s recommendation. [http://timesunion.com/AspStories/story.asp?storyID=685171&category=BUSINESS&BCCode=&newsdate=5/1/2008]

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