Brazilian Newspaper Valor Economico reported that Spanish energy sector giant Iberdrola has agreed to buy all the assets of Ashmore Energy International (AEI), including the Brazilian distributor Elektro. The deal for the investment is worth $8 billion according to the report, but the Spanish giant has denied the reports.

The Spanish company declined to comment on the report except to say in a brief statement, "Iberdrola denies it has signed an agreement to buy AEI for about $8 billion," said the reports.

However, according to Reuters, analysts have reiterated that a deal to acquire all of AEI was unlikely, although Iberdrola's 39 per cent-owned Brazilian affiliate Neoenergia could well be interested in AEI's 99 per cent-owned Sao Paulo power distributor Elektro. According to analysts, the move for the Brazilian distributor presents a good fit in with Iberdrola's strategic focus on power grids and expanding its presence in Brazil.

Reuters noted that the Spanish giant has always had interest in a stake acquisition or a takeover of the Brazilian firm, Elektro. Speculation over Iberdrola’s interest in Elektro has been around for a while. A source familiar with the matter told Reuters in August that Neoenergia had lodged a bid for Elektro in a deal valued at about $4 billion.

Even so, analysts have further argued that Elektro’s enterprise value (EV) of about $3.57 billion means that even if Neoenergia paid a 40 per cent EV premium, it would not be enough to oblige Iberdrola to issue shares to finance the deal. As such, analysts contend that such an acquisition would increase Iberdrola's net debt by 1 billion to 1.4 billion Euros ($1.84 billion) or between 3 per cent and 4 per cent. Subsequently, such an increase is too modest to require a capital increase, argued analysts, said a Reuters report.

But according to Valor Economico, Iberdrola had won out against Brazilian rival CPFL Energia and BTG Pactual, both of whom have been tipped as potential buyers for Elektro.

However, the Spanish power utility firm, Iberdrola SA denied the media report that it is in exclusive talks to acquire assets from Ashmore Energy International, and said it has no plans to buy the U.S.-based company nor its Brazilian distributor arm Elektro.

Valor Online said Iberdrola's exclusivity deal sets a Jan. 15 deadline to decide whether it will go ahead with an offer for the AEI assets, which also include power and gas operations elsewhere in Latin America, China and Eastern Europe.

6 Jan 2011.