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IBERDROLA has completed the acquisition of Brazilian electricity distribution company Elektro(1) for $2.4 billion(2), a transaction that reaffirms its commitment to expand in one of the markets viewed as key to its international growth strategy.
The acquisition, which will be earnings per share accretive in the first year, will be paid for in cash, underlining IBERDROLA’s financial strength and liquidity. Elektro recorded Ebitda of €370 million in 2010 with net earnings of €193 million.
IBERDROLA, which already holds a 39% stake in Neoenergia(3), will as a result become one of the largest electricity companies in Brazil. The transaction, agreed with owner till now AEI(4), has received approval from Brazilian regulators.
Elektro is one of the major electricity providers in Brazil, operating (see map) in the states of Sao Paulo, where it is the third largest distributor, and Mato Grosso. It has 2.2 million customers, supplying more than 11,500 GWh in 2010 through a network of 105,800 kilometers.
The transaction is fully consistent with current strategy focussed on continued international expansion in markets with high growth protential and regulatory stability (such as United States, Brazil, United Kingdom, Mexico), offering greater predictability regarding revenues and also low risk.
This strategy has also been reflected in divestment of non-strategic assets during 2010, including U.S. gas subsidiaries in Connecticut and Massachusetts and other assets in Chile and Guatemala. The Company has redirected activity towards key projects for future development such as the Maine transmission project upgrading connections between this state and Canada, (MPRP(5)) and the purchase of Elektro.
IBERDROLA: strengthened presence in Brazil
The acquisition reinforces IBERDROLA’s presence in a country whose growth potential is among the highest in the region and positions it to take advantage of future business opportunities in Brazil, where it has had a presence since 1997.
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