Spanish utility Iberdrola said on Wednesday it will raise about 3.4 billion euros ($4.6 billion) in a share issue to fund its $4.5 billion cash purchase of U.S. power supply company Energy East.

The news hit Iberdrola shares again, wiping a further 2 percent off their value after they dipped 3.8 percent on Tuesday when Iberdrola said it would likely increase its capital.

A source close to the process said Iberdrola would place 85 million shares at between 39.70 and 40.00 euros a share, meaning Spain's largest power group by market value would raise up to 3.4 billion euros.

By 0915 GMT, Iberdrola shares were 2.2 percent lower at 40.35 euros.

Analysts at BPI were pleased that Iberdrola had moved so quickly to get the cash call into the market.

... this quick move should limit the negative impact that a perspective of a capital call could have if this was not faced quickly, BPI told clients in a note.

Iberdrola said the share issue, accounting for 7 percent of its current capital, would be placed in an accelerated book-built offer (ABO) managed by ABN AMRO Rothschild, Credit Suisse and JP Morgan.

Iberdrola said the new shares will start trading on June 29 and will not be eligible for the 0.593 euro gross dividend which Iberdrola will pay to existing shareholders on July 2.

Both types of shares will be fungible from July 2.

Initial reaction on Tuesday to the Energy East deal was divided as to the value for Iberdrola, with some analysts saying it looked expensive.

They said the purchase, apart from giving Iberdrola more growth opportunities in the United States, also seemed to be part of its defensive strategy against construction company ACS

ACS's holding -- it directly and indirectly controls about 11.8 percent of Iberdrola -- will be diluted to just over 11 percent and has been given no time to react by Iberdrola's swiftness in bringing the placing to market.

ACS has already seen its holding diluted once this year when Iberdrola bought British utility Scottish Power.

ACS Chairman Florentino Perez is said to want to merge Iberdrola with its smaller power producing rival Union Fenosa which ACS controls with a 40.5 percent stake.

Iberdrola's Chairman Ignacio Galan, who has big plans for the utility, does not include Fenosa in them and sector analysts tend to agree that the combination would not be the best deal.

Fenosa on the other hand is reported to be much more keen on the deal.

(Additional reporting by Anshuman Daga in London)