Iberdrola (IBE) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of up to 88% of Electricity North West (ENW) aligns with the strategy to expand regulated electricity networks in core, highly rated markets, enhancing predictable cash flows and business stability.

• Positions the group as the UK’s second-largest electricity transmission and distribution company by regulatory asset base, valued at EUR 14 billion, surpassing the US.

• Enhances presence in the UK, supporting energy transition, Net Zero targets, and electrification efforts.

• ENW's location bridges existing Scottish Power networks, improving operational synergies and efficiency.

• UK becomes the leading market by regulated asset base, with Iberdrola now distributing electricity to around 12 million people.

Financial terms and conditions

• Initial 85.6% stake acquired for GBP 1.7 billion, followed by a GBP 400 million capital increase to reach 88%, with a total equity value of GBP 2.1 billion (€2.5 billion); total company value including debt is approximately €5 billion.

• Implied 100% enterprise value of GBP 4.2 billion, with an EV/RAV multiple of 1.44x and EV/EBITDA of 10.6x.

• Capital increase used to deleverage the company; the remaining 12% is held by a Japanese consortium led by Kansai, with a long-term partnership.

• Transaction funded with available cash, with no negative impact on credit rating.

• Transaction is accretive to earnings per share from year one.

Synergies and expected cost savings

• Significant operational, procurement, and financial efficiencies anticipated due to business proximity, scale, and best practice implementation.

• Financing synergies expected from refinancing higher-cost debt and leveraging the group’s stronger balance sheet.

• Procurement efficiencies identified due to larger CapEx and supplier base.

• Synergies not yet quantified; more details to be provided post-integration.