(Adds Iberdrola statement in paragraphs 1-4, share reaction in paragraph 5, background and context throughout)

By David French

NEW YORK, May 17 (Reuters) - Spanish utility Iberdrola

said on Friday it is nearing a deal to acquire the remaining 18.4% stake in its U.S. subsidiary Avangrid that it does not already own for about $2.6 billion.

The agreement would come after Avangrid abandoned in January a $8.3 billion deal to acquire U.S. competitor PNM Resources

because it failed to secure approval from New Mexico's utility regulator more than three years after first announcing the plan.

The Iberdrola statement confirmed an earlier Reuters story saying that Iberdrola was in advanced talks to pay $35.75 per share for the Avangrid shares it does not own, citing people familiar with the matter who spoke on condition of anonymity.

Iberdrola confirmed the terms being discussed in a statement, and cautioned the agreement has been in principle thus far, and is not yet binding. It said the deal would increase its exposure to its U.S. business, which it is seeking to grow.

The deal price is below the $37.53 level at which the stock ended trading on Thursday. Avangrid's stock dropped 5.3% to $35.54 in pre-market trading on the initial Reuters story before its trading was suspended.

Avangrid did not immediately respond to a request for comment.

Iberdrola, one of Europe's largest power companies, said in March it would offer $34.25 per share to buy out the remainder of Avangrid. The price represented at the time a premium of approximately 10% to the weighted average share price of Avangrid in the preceding 30 days.

Avangrid operates renewable power assets in 24 states, and also serves 3.3 million customers in New York and New England through regulated utility operations, per its website.

It began trading as an independent company in December 2015, following the merger of Iberdrola USA and UIL Holdings Corporation.

Iberdrola

said

in March it plans to invest 41 billion euros ($44.57 billion) over the next three years, with a focus on upgrading and expanding power grids in the United States.

($1 = 0.9199 euros)

(Reporting by David French in New York Editing by Greg Roumeliotis and Chizu Nomiyama)

((Greg.Roumeliotis@thomsonreuters.com; +1 646 223 6022; Reuters Messaging: greg.roumeliotis.thomsonreuters.com@reuters.net))