European company may buy Iberdrola

(February 5, 2008) — MADRID, Spain — Iberdrola SA, the power producer that wants to buy the parent of Rochester Gas and Electric, is itself the subject of a possible takeover attempt and is poised to hire Morgan Stanley to prepare a defense.

Iberdrola's shares have jumped 33 percent in Madrid trading in recent days after the newspaper Cinco Dias reported that Electricite de France SA was preparing a bid, possibly with another utility.

Spain's only larger power company, Endesa SA, was acquired last year after a 25-month bidding contest.

"Iberdrola has learned from past hostile bid attempts that good defensive planning is half a battle won," said Pedro Real de Asua, a money manager at Barclays in Madrid. "Iberdrola is the only possible takeover target for any company with pan-European ambitions."

Morgan Stanley, the big investment bank based in New York City, has advised Iberdrola previously. In 2000, when Endesa was pursuing its competitor, Morgan Stanley recommended against the $13 billion bid. The investment firm also helped Bilbao-based Iberdrola repel Gas Natural SDG in 2003.

Neither Iberdrola nor Morgan Stanley would publicly comment on the Electricite de France situation, but experts in the European utility industry said Morgan Stanley will again advise Iberdrola.

European utility mergers increased 24 percent last year to a record $217 billion because of rising energy prices. Iberdrola completed the $28 billion purchase of Scottish Power Plc last April, adding plants in North America and the United Kingdom.

Chairman Ignacio Sanchez Galan is planning for Iberdrola, the world's largest owner of wind farms, to profit from alternative energy as nations seek to curb carbon dioxide emissions and cut reliance on imported fuel.

In the United States, Iberdrola has an agreement to purchase Energy East Corp. for $4.5 billion. The Portland, Maine, company is the parent of RG&E and New York State Electric & Gas, both with headquarters in Rochester.

Iberdrola and Energy East have said they expect the deal to close in the first half of 2008, though action by the New York state Public Service Commission is still pending.

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