OREANDA-NEWS. Spanish utility holding company Iberdrola is expanding its presence as a regulated US utility through an acquisition of UIL Holdings, which owns several northeast US gas and electric companies.

Iberdrola said that higher exposure to US dollar revenue and a stronger position in a country with better sovereign debt ratings than Spain are the main drivers of the deal. The company's wholly owned Iberdrola USA subsidiary will merge with UIL and the new entity will become a publicly traded entity listed at the New York Stock Exchange.

The deal involves a \$597mn cash payment to UIL shareholders, who will own 18.5pc of stock in the combined company. Iberdrola's parent company will own the rest. Iberdrola and UIL estimate the combined company's value at \$18bn.

The expanded Iberdrola USA will own New York State Electric & Gas, Rochester Gas & Electric, Central Maine Power, United Illuminating, Southern Connecticut Gas, Connecticut Natural Gas and Berkshire Gas. The utilities have a combined rate base of \$8.3bn and serve 2.18mn electric and 969,000 gas customers in Connecticut, Maine, Massachusetts and New York.

UIL chief executive James Torgerson will lead Iberdrola USA after the deal closes.

"We will be a more diversified and stronger utility as a group with greater scale and financial resources to support continued investment in system reliability and infrastructure projects," Torgerson said. The new company plans to invest \$6.9bn in the US regulated electric and gas infrastructure and transmission in the next five years.

Iberdrola USA will have 6.7GW of generating capacity,with the addition of 200MW of UIL's fleet. The total includes 5.8GW of wind generation across the US, with 85pc of that output sold under long-term agreements. Iberdrola says its wind portfolio is the second largest in the US, after NextEra Energy.

Iberdrola also owns 68 Bcf (2bn m?) of natural gas storage in the US Gulf coast.

The deal, expected to close this year, requires approval from state utility regulators in Connecticut and Massachusetts and US federal authorizations from the Federal Energy Regulatory Commission, Department of Justice and the Committee on Foreign Investment.