Iberdrola to reconsider Energy East if restricted

Spanish power company Iberdrola (IBE.MC: Quote, Profile, Research, Stock Buzz) said on Tuesday it will reconsider its purchase of U.S. power company Energy East Corp (EAS.N: Quote, Profile, Research, Stock Buzz) if its ability to invest in renewable energy is restricted in the state of New York.

An Iberdrola spokesman said a judge's recommendation against the $4.5 billion purchase still meant that New York's Public Services Commission would have the final say.

"Even though we are still confident of a positive outcome from the PSC, if we can't go ahead with the purchase of Energy East, Iberdrola will not change its objectives in the United States given various opportunities for investment in other states, that it has already identified," the spokesman said.

If the deal falls through it will liberate $6.4 billion for Iberdrola -- the value of the Energy East deal when assumed debt is included.

On Monday, New York judge Rafael Epstein said the deal should be blocked because it is not in the public's best interests but he said that if the deal were to be approved it should be with certain conditions.

These would include prohibiting the company from owning electricity generating plants interconnected with Energy East's transmission and distribution systems in New York and requiring the company to pay out nearly $650 million of "positive benefit adjustments" for customers in New York.

Analysts have already said that the judge's recommendation has diminished the likelihood of the deal being completed and Iberdrola has been playing down its importance for some time, saying it has other places where it can invest.

The company said it expects the New York PSC to hand down its decision next month after Iberdrola has had an opportunity to present further evidence.

Iberdrola raised the money for the Energy East through a share issue a year ago which raised 3.375 billion euro ($4.5 billion at the time).

Iberdrola shares were down 0.5 percent by 1100 GMT compared to a 0.5 percent gain for the DJ Stoxx European utilities index.