Spain’s Iberdrola has announced an $8.3 billion deal (including debt), adding PNM Resources to its Avangrid business. The combined entity will encompass 10 regulated electricity suppliers across six states, with 4 million customers ranging from Avangrid’s stronghold in New England and New York to PNM Resources’ base in the Southwest.
Absorbing PNM into Avangrid will create an operator present in 24 states and bring together firms with a combined market value topping $20 billion. The enlarged company will be the third-biggest US renewables operator, with about 7.4 GW of capacity and a large pipeline of projects.
The deal has already been approved by PNM Resources’ board of directors. PNM’s board has unanimously approved the $4.3 billion offer to its shareholders of $50.3 per share, compared to the closing price of $45.75 on October 20. Iberdrola expects the deal to close in 2021 and start boosting financial results from the first year. That gives the deal an equity value of $4.3 billion, and an enterprise value — which includes debt — of $8.3 billion. Both companies are listed on the New York Stock Exchange, and Spain’s Iberdrola S.A. will remain the largest shareholder.
Spain’s Iberdrola claims to be the world’s third-largest electricity company; alongside European peers including Denmark’s Ørsted, Portugal’s EDP and Germany’s RWE, it has emerged as a potential global “clean energy major” to rival the oil giants of yesteryear. In the US, it has made a strong foothold, especially in the wind power space where it currently owns nearly 2 GW of wind and solar capacity in New Mexico and Texas. The acquisition of PNM Resources will give it a platform for further growth in the Southwest, including regulated generation assets that do not need to scrap for an offtake agreement and transmission lines critical for bringing power to market.
In the summer of 2020, state regulators approved a plan for Public Service Company of New Mexico — one of PNM Resources’ two main utility subsidiaries — to eliminate coal power produced at the San Juan Generating Station from its mix. Instead, the coal capacity will be replaced entirely with solar and batteries, marking a dramatic pivot for the company. San Juan is currently PNM’s largest source of generation.
REGlobal’s Views: In line with its plan, announced in early 2020, to make record investments in clean energy, Iberdrola has been moving rapidly in this space. So far this year, it has acquired clean energy projects or companies in France, Scotland, Sweden, Japan, Brazil and Australia. By acquiring PNM, it has strengthened its foothold in the US as well. All its transactions are directed to countries with good credit ratings and legal and regulatory stability, offering opportunities for future growth.