Spanish firm to buy Scottish Power

Iberdrola, Spain’s second-largest power company, agreed Tuesday to buy Scottish Power for 11.6 billion pounds ($22.6 billion), increasing its electricity production by almost a third and adding plants in Britain and North America.

Iberdrola, the world’s largest producer of electricity from wind, will increase its renewable-power capacity 48% with the purchase as European governments tighten limits on carbon dioxide emissions. The Spanish utility will get a tenth of the energy market in Britain, Europe’s second-biggest economy.

Scottish Power last year rejected a takeover bid from German utility E.ON. European utility takeovers have surged 33% this year to more than $200 billion as companies seek new customers before energy markets open to more competition next year.

E.ON is bidding 37.1 billion euros ($49 billion) for Spain’s Endesa, and France’s Suez and Gaz de France plan to merge.

The purchase of Scottish Power would be the world’s third-largest utility takeover, after the Endesa and Gaz de France transactions.

Iberdrola, the largest owner of wind-driven turbines, has sought new capacity, especially in the U.S., where it bought three wind-park developers this year.

Chairman Ignacio Sanchez Galan agreed in October to buy turbines from Gamesa Corporacion Tecnologica, valued at as much as $4 billion, to install in the U.S., Spain, Mexico and elsewhere in Europe. Iberdrola is Gamesa’s largest shareholder.

PPM Energy Inc., Scottish Power’s unit in the U.S., has more than 2,000 megawatts of wind energy in operation or under construction.

Scottish Power this year scaled down in the U.S. and sold its U.S. PacifiCorp unit to MidAmerican Energy Holdings Co., a utility controlled by Warren E. Buffett, for $5.1 billion in cash.