President Evo Morales announced a decree targeting Iberdrola-owned utilities Electropaz and Elfeo in the cities of La Paz and Oruro.
In La Paz, soldiers later took control of power plants that until now were run by Iberdrola, while police seized corporate offices.
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Iberdrola said it hopes Bolivia will pay "a fair price" for the utilities nationalized by La Paz.
"We hope we will get the real value of our share" in the expropriated companies, an Iberdrola spokesman told AFP in Madrid. He did not say how much the Spanish company expected to be paid or whether an estimate had already been made.
Quoting market sources, the Spanish press estimated Iberdrola's share in the utilities in Bolivia at $100 million.
It was the latest in a series of such seizures by the outspoken leftist who is a key member of a group of populist South American presidents led by the now-ailing Hugo Chavez of Venezuela.
In May, Morales nationalized a subsidiary of another Spanish power group, electricity distributor Red Electrica Corporacion.
Since coming to power in January 2006, Bolivia's first president representing the country's indigenous majority has nationalized the country's oil wealth and smelters, in addition to electric power companies.
This time, Morales said he was acting because Iberdrola charged more for electricity in rural areas than it did in cities, and service was also uneven.
"We are forced to take this measure so that utility rates will be uniform" and service will be of the same quality in the country as in urban areas, the president said during a ceremony at the presidential palace.
He said Iberdrola would be compensated after an evaluation of its seized assets. This will be done by a private Bolivian company and can take up to six months.
Morales's actions over the years have caused friction with Spain.
Spain said after the Red Electrica nationalization that it had been given assurances from Bolivia that there would be no more such expropriations.
Spanish Foreign Minister Jose Manuel Garcia-Margallo said in August that Spanish companies operating in Bolivia needed legal security for their investments.
The May 2006 energy nationalization affected abotu a dozen companies, including Spain's Repsol, Petrobras of Brazil, Argentina's PanAmerican and British Petroleum.
Morales has also nationalized refineries and telecommunications companies.
