Iberdrola is preparing a strategic reorganization following its decision to renounce the purchase of the US electricity company PNM Resources following the veto of the New Mexico regulator, which was being appealed in court. Between the amount of the operation, the debt of the acquired company and the planned investments, it had committed close to 10,000 million euros.
Company sources indicate that the investment reorientation would not have to concentrate on the United States and that the details of the new direction will be known on March 21, on the investor day that the company plans to hold in London to report on the progress of its strategic plan between 2022 and 2025.
The shift in the United States will require important adjustments, since the current plan is based in part on the acquisition of PNM, destined to become the second largest in the history of the Spanish company, after Scottish Power in 2009. In a note, Avangrid, the US subsidiary 85% owned by Iberdrola, indicated yesterday that, despite canceling the purchase of PNM, it still has investment plans for 9,000 million dollars (8,200 million) in the country.
The resignation implies abandoning a project that would have integrated ten regulated electricity companies in the United States, with a presence in New York, Connecticut, Maine, Massachusetts, New Mexico and Texas. They would have formed a regional giant around Iberdrola, which is already the second largest producer of renewables in the country.
However, the process ran aground due to the regulatory veto in New Mexico, whose authorities concluded that the operation would bring more costs than benefits, after citing, among other reasons, the reputational ones derived from the Villarejo case. At that time, the National Court was investigating the hiring of the former commissioner’s company. Iberdrola appealed the decision to the New Mexico Supreme Court, which has not yet ruled.
Yesterday Iberdrola informed the CNMV that it was giving up taking over PNM because the “stipulated conditions” had not been met. The resulting group would have had a company value, including debt, of close to 8.3 billion dollars (7 billion euros), in addition to a presence in six North American states.
Avangrid did later provide some additional explanation in a note sent to the SEC. He said that “he had struggled” to achieve regulatory approval in New Mexico, but that “at the end of 2023 there was still no planned schedule” for the resolution of the procedure in this state.
On January 1, the commitments that united the parties expired and, as indicated by the Spanish company, they have chosen to renounce an operation that had been agreed in 2020, before the interest rate increases and in a sectoral scenario. different.
Analysts consider that Iberdrola’s decision may be positive. Goldman Sachs says it is freeing the company from 9 billion in debt and UBS highlights that “market conditions have changed.” “It would have raised doubts about financing,” says Morgan Stanley.