The deal, which will enable Eastern to distribute both electricity and gas throughout Spain, is expected to be announced at lunchtime today.
Ramon Almendros, a spokesman for Hidroelectrica del Cantabrico, said the alliance was expected to be confirmed after a meeting of Cantabrico's board this morning. The two companies had been discussing a "collaboration agreement in electricity and gas distribution," Mr Almendros said, but he declined to reveal specific details of the link-up.
Dave Bettridge, a spokesman for Eastern, a wholly-owned subsidiary of Texas Utilities, would only confirm that Eastern had been in talks with Cantabrico. He ruled out a takeover or swap of assets.
The Spanish government will open 40 per cent of the electricity market to foreign competition early next year, and has imposed rate cuts on suppliers.
Cantabrico is the only one of Spain's big four utility companies not to have allied itself with a foreign company. In October, National Power bought 25 per cent of Fenosa, Spain's third-largest electricity company, cementing their previous alliance.
An analyst in Madrid said Cantabrico was a good, efficient company and an excellent "port of entry" into the Spanish market. The company, based in the North-west of Spain, would benefit from Eastern's gas and distribution expertise, he added.
Trading in Cantabrico shares was suspended for an hour by regulatory authorities yesterday as rumours of a link-up swept Madrid dealing rooms. Cantabrico shares ended the day up 2 per cent.Reuse content