Iberdrola agreed to buy PNM Resources for $4.3 billion, pushing deeper into the U.S. power market as the Spanish utility strengthens its position as a global giant in an industry that’s being transformed.
The deal — at $50.30 per PNM share and a 10% premium — valued PNM at $8.3 billion including debt. It’s Iberdrola’s eighth acquisition since the start of the coronavirus pandemic. The company bought Infigen Energy in Australia in September.
It continues a strategy by Chief Executive Officer Ignacio Galan to grow beyond the Iberian peninsula and build a business with worldwide reach in power grids and renewables plants.
Galan was among the first in the utility business to wind down coal plants and build renewables, taking advantage of a plunge in the cost of wind turbines and government incentives to slash emissions. That’s touched off a flurry of deals to reshape the electricity industry, drawing oil majors including Royal Dutch Shell and Total to grab a part of a business once dominated by utilities.
“We have been pioneers in the energy revolution for 20 years, when everybody thought electricity couldn’t be produced with clean sources,” Galan told analysts during a results call on Wednesday. “We started our energy transition 20 years ago.”
Overall, this year’s buying spree has helped boost Iberdrola’s pipeline of future power projects to more than 70 gigawatts of capacity. That’s 40% more green energy than BP has said it plans to have ready to go in the next decade, the most ambitious plan among European oil majors.
Galan is seeking to bring Iberdrola into new markets in the most developed economies, firming up routes to build more green power projects in the coming years. He has seen the coronavirus-induced economic downturn as an opportunity to boost spending, enacting a 10 billion-euro ($11.9 billion) investment plan.
PNM provides power to about 790,000 homes and businesses in Texas and New Mexico and has 2.8 gigawatts of generation capacity, according to information on its website. Like many U.S. utilities, it’s been pushing to retire coal plants and adding renewable energy, moves in step an effort Iberdrola started pursuing almost two decades ago.
Iberdrola posted positive financial results Wednesday with increases in net profit and earnings in the three months to September. The company saw a 52% rise in renewable investment in the first nine months of 2020 and has added 4.6 gigawatts of power capacity in the last 12 months.
The $50.30 a share deal is a 10% premium to yesterday’s closing price but also a 10% discount to the pre-Covid high earlier this year.
An accord would also offer Iberdrola the chance to further expand beyond the territory of its New York-listed unit Avangrid, which works in the northeastern U.S. Although the Madrid-based utility, one of the world’s leading producers of renewable energy, already operates across North America, its main business is around Avangrid.
PNM will give Iberdrola 10 regulated electricity companies in six states — New York, Connecticut, Maine, Massachusetts, New Mexico and Texas, according to the company.
Iberdrola’s shares are up almost 19% this year, making it the second-largest company in the benchmark Ibex-35 by market capitalization.
PNM has received regulatory approval to more than triple its renewable-power capacity to 2 gigawatts by the end of 2022. It has set a goal to be 100% emissions free by 2040.
The deal requires approval from a PNM shareholders meeting.