Judge recommends New York Public Service Commission not approve merger of Iberdrola, Energy East

By Lisa Kerner

Charlotte, N.C., June 20 - An administrative law judge recommended that the New York Public Service Commission disapprove Iberdrola, SA's acquisition of Energy East Corp. on the grounds it does not satisfy the public interest requirement of Public Service Law Section 70.

The recommendation is non-binding, according to an 8-K filing with the Securities and Exchange Commission.

Should the NYPSC approve the transaction, the judge recommended several conditions that should be imposed including that Iberdrola and its affiliates be prohibited from owning or operating electric generating plants that are interconnected with the transmission or distribution systems of New York State Electric & Gas or Rochester Gas and Electric.

The judge also recommended that Energy East - including New York State Electric & Gas and Rochester Gas and Electric - be required to divest all of its existing generation in New York.

Energy East said it submitted a notice to Iberdrola extending the merger closing date due to the NYPSC proceedings.

Briefs on exceptions to the recommended decision are due June 26, and briefs opposing exceptions are due July 3.

The companies are unable to predict the timing of an NYPSC decision.

In December, Iberdrola announced that the Federal Energy Regulatory Commission was the fifth regulatory agency to approve the merger. At that time, remaining regulatory approvals were still needed from the states of New York, Maine and New Hampshire.

Roughly one year ago, Iberdrola agreed to acquire Energy East in a transaction valued at $8.6 billion, or $28.50 per share. The transaction had been slated to close in the first half of 2008.

Energy East is a utility company based in New Gloucester, Maine, and Iberdrola is a utility located in Bilbao, Spain.

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