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21/10/2020

Through its US controlled subsidiary AVANGRID

Iberdrola acquires PNM Resources in the US, the utility of New Mexico and Texas

Ignacio Galán

Chairman & CEO of Iberdrola and Chairman of Avangrid

The operation aligns to the strategy we have followed for more than 20 years. Friendly transactions, focused on regulated businesses and renewable energy, in countries with good credit ratings and legal and regulatory stability, offering opportunities for future growth

  • The acquisition implies an Enterprise Value of approximately $8.3 Bn
  • Friendly transaction approved and recommended to PNM shareholders by PNM's Board of Directors
  • The integration into Avangrid will create one of the largest companies in the US utility industry with 10 regulated electricity companies in 6 states (New York, Connecticut, Maine, Massachusetts, New Mexico and Texas) and the third largest renewable energy operator in the United States with a total presence in 24 states.
  • The combined company will have assets in excess of $40 billion, have approximately $2.5 billion in EBITDA and a net profit of $850 million1
  • The combination of Avangrid and PNM will manage more than 4.1 million supply points, a regulated asset base (RAB) of $14.4 billion, more than 168,000 km of networks and approximately 10.9 GW of installed capacity2
  • The transaction will contribute positively to results from the first year
  • With this transaction, the Iberdrola Group accelerates its growth through the 8th corporate transaction since the beginning of the Covid pandemic following acquisitions in France (St Brieuc and Aalto Power), in Australia (Infigen), offshore wind companies in Sweden and Japan and onshore wind projects in Scotland and Brazil
  • New Mexico and Texas are states where Iberdrola currently has 1,900 MW of renewables and 1,400 MW in its pipeline. In addition to commencing commercial activity in Texas, for more than 15 years Iberdrola has been financing the "King Felipe VI in Information Technology and its Applications" chair at the University of New Mexico
  • The transaction, subject to the relevant regulatory and PNM shareholders' approval, is expected to close in 2021

The board of directors of Avangrid Inc. has approved the acquisition of PNM by Avangrid. This friendly transaction, recommended by PNM's board of directors, will be effected via merger. PNM's shareholders will receive $4.3 Bn in cash. It implies an Enterprise Value of approximately $ 8.3 Bn considering a net debt plus other adjustments of approximately $4 Bn.

The purchase price represents a premium of 10% over the PNM`s share price as of Tuesday 20th October and 19.3% over the average PNM share price during the 30 days prior to prior to Wednesday 21st October.

The combination of Avangrid and PNM, with over 4.1 million points of supply, regulated asset base (RAB) of $14.4 Bn, more than 168,000 Km of networks and approximately 10.9 GW of installed capacity (as of 2019), will accelerate Iberdrola Group's growth in the US.

The agreement between Avangrid and PNM, is subject to approval by PNM shareholders. As PNM and its subsidiaries operate in a regulated sector, the relevant authorizations at state level (New Mexico Public Regulation Commission and Public Utility Commission of Texas) and Federal level (Federal Energy Regulatory Commission, Hart Scott Rodino Clearance, Committee on Foreign Investment in the United States, Federal Communications Commission and Nuclear Regulatory Commission) will be required. This process is expected to be completed in 2021.

Ignacio Galán, Chairman & CEO of Iberdrola and Chairman of Avangrid said: "The operation aligns to the strategy we have followed for more than 20 years. Friendly transactions, focused on regulated businesses and renewable energy, in countries with good credit ratings and legal and regulatory stability, offering opportunities for future growth".

Iberdrola currently owns 1,900 MW of renewable energy and a pipeline of 1,400 MW renewables assets in New Mexico and Texas. In addition, Iberdrola operates a retail business in Texas. For more than 15 years, Iberdrola has also funded the King Felipe VI Chair in the Department of Electrical and Computer Engineering at the University of New Mexico.


Avangrid

Avangrid, listed on the New York Stock Exchange, is a diversified energy and utility company with operations in 24 states in the United States that consolidates the U.S. energy operations of its parent, Iberdrola.

In 2019, Avangrid had approximately 2.3 million electricity and 1.0 million gas points of supply. The company distributed a total of 36 gigawatt hours (GWh) of electricity and had an installed capacity of 8.1 gigawatts (GW).

Avangrid has a Market Capitalization as of the 20th of October of approximately $16.8 Bn, an Enterprise Value of $25.7 Bn and EBITDA of $1.9 Bn as of 2019.


PNM

PNM Resources, listed on the New York Stock Exchange, is an energy holding company based in Albuquerque, N.M. In 2019, through its regulated utilities, PNM and TNMP, PNM Resources had 2.8 gigawatts (GW) of generation capacity, provided electricity to approximately 790,000 homes and businesses and distributed a total of 14.9 terawatt hours (TWh) in New Mexico and Texas.

PNM has a Market Capitalization as of the 20th of October of approximately $3.9 Bn, an Enterprise Value of $7.5 Bn, and EBITDA of $586 MM as of 2019.


Strategic fit

The acquisition of PNM fits within Iberdrola's strategy:                                                                                        

  • Growth in regulated utility business, primarily transmission and distribution, and renewables
  • Increase exposure in good rated countries (AAA)
  • Immediately accretive to earnings
  • Maintaining financial strength





1 2019 pro- forma data
2 Includes regulated generation that consist of both owned generation assets in rate base receiving a regulated return and contracted PPAs in rates approved by the public commission receiving a regulated cost pass through.

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