No IPO, originally Pacificorp was bought out by Scottish Power and Light which was bought out by Iberdrola.
This article might explain a little of the genesis of this stock and prospects for future growth.
Iberdrola's Stock Lifted By Hot Air Parmy Olson, 04.19.07, 11:45 AM ET Reuters LONDON - There may be a little too much hot air in the market about Iberdrola, the Spanish energy leviathan and world's biggest provider of wind power.
Analysts at UBS have downgraded the company to "neutral 2" from "neutral 1" saying that it was becoming unlikely that Iberdrola would become a takeover target, despite the growing speculation about acquisitions in the region.
Iberdrola (other-otc: IBDRF - news - people ) was down 50 euro cents (68 cents), or 1.4%, at 35.51 euros ($48.25) on Thursday afternoon in Madrid. Despite the downgrade, UBS raised its price target to 36 euros ($48.74) from 25 euros ($33.85).
Late last year, Iberdrola announced it was buying Scottish Power (nyse: SPI - news - people ), Britain's fifth-biggest energy company, for 17.1 billion euros ($22.5 billion). (See: "Iberdrola's Scottish Landfall") That money may have been better spent, according to UBS.
"Our analysis suggests that Iberdrola is potentially destroying value in this acquisition as the benefits from the transaction (potential synergies and various tax credits) do not offset the overpayment against our fundamental valuation of Scottish Power," said UBS analyst Jose De La Rosa Rato in a research note, adding that the stock was "expensive," and "likely to remain so."
Iberdrola also faces challenges that not only include making a worthy return on its acquisition of Scottish Power, but a generally more troublesome energy landscape because of potential developments in Spanish government regulations.
In March 2006, Spain chose to crack down on the extra revenues that energy companies like Iberdrola were booking under the European Union's carbon trading system. The system caps the amount of carbon dioxide that can be emitted from energy plants and allows companies to trade their allocated allowances. Free allowances granted to utilities by the Spanish government have a market value that can add to a company's sales.
Though it's still not clear how the Spanish government will go on to deal with these free allowances in future years, UBS believes it could deduct their market value through tariffs. The allowances have little value now, but UBS expects them to rise. One other factor may be giving Iberdrola a little too much limelight is a current fad for companies that can benefit from fears of climate change. "The growing global appetite for renewable energy assets is causing companies with exposure to these segments to trade at a premium to peers," said De La Rosa Rato. "In this context, Iberdrola is not only a global leader in wind, but is also one of the few European large-cap companies to be heavily exposed to the global warming theme."