Investors reticent about merger

Investors too are now betting that the Energy East/Iberdrola will never be consummated.

Energy East closed at $23.37 on Wednesday, the stock's lowest point since the Iberdrola deal was announced last June.

Energy East is now trading at 18 percent discount to the $28.50 price offered by Iberdrola. That's evidence that there's plenty of skepticism that this deal will be a bust as New York regulators scrutinize the impact the deal's impact on consumers.

Iberdrola wary of the PSC

Iberdrola executives say they may walk away from the proposed $4.5 billion acquisition of Energy East if New York regulators impose burdensome hurdles to the deal.

Iberdrola's CEO says that while he hopes to complete the deal by this year's third quarter, he's wary about conditions the New York Public Service Commission may require to overcome objections voiced by regulators.

Read more here

Read previous posts about the acquisition here.

Analyst predicted rough road for merger

The $4.5 billion takeover of Energy East by Iberdrola was announced on June 25, 2007. At the time, the parties said they expected the deal to be complete by the end of this year's second quarter. That is looking more and more unlikely given the objections by NY regulators who contend that ratepayers will not benefit as the deal is now structured. Of course, Iberdrola and Energy East dispute that claim.

Company officials expected smooth sailing for the deal. But there were some who were not as optimistic.

The Press & Sun-Bulletin quoted a Morningstar analyst who predicted trouble ahead.

In a research note released the week following the acquisition announcement, Ryan McLean, an analyst with Morningstar, of Chicago, said the transaction has several regulatory obstacles to overcome. He said that though there should be major objections, Energy East’s past disputes with regulators, especially in New York, could make the normally smooth road to approval by regulators rougher than expected.

“On balance, we believe the merger chances are good, but not assured,” McLean wrote.

Iberdrola makes a bid to soothe N.Y. regulators

A Spanish newspaper is reporting that Iberdrola has made a bid to satisfy some of the concerns expressed by New York regulators about the pending merger with Energy East.

Citing unnamed sources, the newspaper said Iberdrola has proposed the following:

*Sell Energy East's non-wind assets.

* Sell regulated assets worth $200 million.

Read a summary of the story here.

Many express interest in Energy East merger

Seventy parties are listed on the "Active Party" list assembled by the New York State Public Service Commission's hearing into the Iberdrola/Energy East merger.

See the list here.

Attempts to iron out differences between the merger partners and regulators failed earlier this month. The PSC claims the merger agreement fails to adequate consumer protections, among other findings.

See the entire PSC file on the merger here

Interestingly, while the City of Lockport and the City of Rochester are listed as active parties on the list, no other municipalities appear to be listed, and are cut off from taking part in the testimony.

Some doubt in the market about Iberdrola deal

Energy East is supposed to be bought out by Spanish-based Iberdrola at $28.50 a share at the end of the second quarter. But the markets are not so sure.

Last week, when there were revelations about the increased possibility of Iberdrola itself being a takeover target (see blog entry below) and the failure of Energy East and New York regulators to come to terms on the perceived consumer benefits of the merger, the stock took a dive.

Now Energy East is trading in the $25.50 range , 15 percent below the proposed Iberdrola acquisition price.

That clearly indicates that there is genuine doubt that the merger will take place either at all, or within the time frame originally proposed. It is much more likely the former reason.

Energy East/Iberdrola merger far from certain

Électricité de France SA, one of Europe's largest utilities, is in talks about forming a bidding duo with Actividades de Construcción y Servicios SA, a Spanish construction company. The team would make simultaneous bids for two of Spain's largest utilities -- Iberdrola SA, the country's largest by market value, and Unión Fenosa, the third-largest, according to reports in this morning's Wall Street Journal.

Another factor in the proposed deals is the fate of Iberdrola's $4.5 billion planned acquisition of New York utility Energy East. It has been approved by federal and some state regulators but faces an uncertain future in New York. The deal's failure would make it easier for the Spanish utility to be sold because neither EdF nor ACS is interested in owning a U.S. utility, and regulators in the U.S. might not accept them anyway, the Journal said.

Staff of the New York Public Service Commission have expressed unhappiness with terms of the deal, feeling it provides too little benefit and somewhat greater risk to customers, the Journal said.

Commission staff also worried that the U.S. utilities could become pawns in some larger contest involving Iberdrola and have looked at "ring fencing" as a mechanism to quarantine the regulated utilities from any future financial difficulties of a parent company, said commission spokesman James Denn. A similar structure was created last year when Britain's National Grid PLC acquired KeySpan, another New York utility, he added, the Journal said.

Energy East and regulators at odds again

Surprise!

Energy and the Public Service Commission have failed in their attempts to settle their differences on issues involving the Iberdrola merger.

According to this release from Energy East, testimony on the issues involved in the merger will begin again on March 17. Read the hearing notice here

It had been hoped that the two parties could find some common ground in private negotiations. That apparently hasn't happened, putting in jeopardy the expected second quarter closing of this $4.6 billion merger.

New York regulators are the last in line for approval. Staff at the PSC contends that there are insufficent customer safeguards and benefits in the proposed merger.

Lawsuit objecting to Iberdrola merger settled

It seems like some Energy East shareholders were not pleased with the pending $4.6 billion acquisition of the company by Iberdrola. Energy East reveals in an SEC filing dated Feb 29 that it settled a class-action lawsuit that sought to derail the deal.

Plantiffs alleged that Energy East directors breached their fiduciary responsibility, and failed to get a fair price for the company. Energy East denied the allegations.

On Sept. 26, 2007, the suit was settled, with Energy East agreeing to disclose more information that was contained in a proxy statement that was mailed to shareholders. Energy East also agreed to pay the $340,000 in legal fees for the plantiffs.

As an Energy East shareholder, do you think the $28.50 per share price for the company was adaquate?

Energy East negotiating merger settlement with PSC

It appears that Public Service Commission staff and representatives of Iberdrola may be engaged in some quiet negotiations to solve the differences that are preventing the regulatory commission from approving the $4.6 billion merger of the two.

An administrative court judge, in a filing with the PSC, indicates that he is delaying further hearings in the case while Ibderdrola and PSC staff negotiate a settlement.

The PSC objects to the terms of the merger because it says there are insufficient protections for the customer.

NYSEG sees a ghost from the past

A NYSEG former human resource manager who has alleged that NYSEG waged a war against the customer has been granted "active party status" in discussions Energy East is having with the regulators to solve the stalemate that has developed with the PSC on approval of the Iberdrola merger.

This comes against the vigorous objections of Energy East.

Corbett claims officials at New York State Electric & Gas Corp. and its parent, Energy East, called an initiative to drive down employee wages and benefits “operation rape and pillage,” and said they wanted to avoid sharing any excess earnings with customers.

NYSEG has labeled the allegations as “baseless and without merit.”

The charges were contained in a four-page statement submitted to the Public Service Commission in 2006 by Corbett, who was NYSEG human resources director until April 2005.

Two people in charge of the company's initiative to trim benefits and salaries were given the nicknames of “shock” and “awe” in a direct reference to the Iraq war, Corbett alleges in his statement. Despite pleas from employees, Corbett said NYSEG refused to divulge the reasons for its actions on wages and benefits to the work force.