(Reuters) January 19, 2011 – Spanish power utility Iberdrola agreed to pay 1.78 billion euros (US$2.4 billion) for Brazilian energy distributor Elektro as it expands in Latin America’s largest economy.

Iberdrola bought the equivalent of 99.68 percent of Elektro’s capital from AEI, the investment vehicle controlled by U.K. investment company Ashmore Group, the company said in a securities filing with Spain’s securities regulators. The deal is expected to be concluded within the next six months.

Iberdrola, Spain’s biggest power utility, is expanding in Latin America, where growth is near the fastest in three decades, as a recession in its homeland eats into revenue.

Iberdrola said the transaction is subject to the approval of regulators. Elektro serves several municipalities in the state of Sao Paulo, Brazil’s most populous and wealthiest region.

The deal comes as players in Brazil’s power distribution sector seeks to combine to cope with rising government pressure to cut rates. Unlike the generation and transmission sectors, where 80 percent and 88 percent of companies are state-run, respectively, power distribution in Brazil is 68 percent dominated by private players.

By Carolina Marcondes and Guillermo Parra-Bernal