By Shriya Ramakrishnan and Shashwat Awasthi

(Reuters) - A bidding war for Australian wind and solar firm Infigen Energy <IFN.AX> heated up on Monday, with Spain's Iberdrola <IBE.MC> raising its bid to A$856 million ($589.1 million), shortly after Philippine conglomerate Ayala Corp <AC.PS> hiked its offer.

Philippines-based UAC Energy, a joint venture of Ayala's AC Energy <ACEPH.PS> and Hong Kong-based UPC Renewables Group, revised its cash offer to A$0.86 per share from A$0.80 per share earlier on Monday, matching Iberdrola's <IBE.MC> initial bid.

UAC also declared its bid free of conditions which had irked Infigen.

Iberdrola responded immediately by sweetening its offer by 3 cents to A$0.89 a share, a touch above Infigen's close on Friday of A$0.885, valuing the renewables firm at A$856 million.

Infigen shares jumped 4% to trade at A$0.92, indicating investors expect both suitors to improved their bids.

Infigen said it was considering developments on both the offers and advised shareholders not to take any action.

Analysts had forecast a bidding war as the firms tussle for Infigen's seven wind farms and a large pipeline of projects which it recently put on hold.

Iberdrola and UAC pounced on Infigen after its share price slumped due to falling power prices in Australia and challenges facing wind and solar firms hooking up projects to a shaky grid.

UAC has already secured approval for its bid from Australia's foreign investment board, at a time when the country has introduced tougher policies to monitor foreign investments as interest rises for troubled Australian assets in the wake of the coronavirus pandemic.

Infigen earlier backed Iberdrola's offer, as the bid from the Spanish company was 7.5% higher with fewer conditions.

"We think that Iberdrola may need to reduce the conditions in its offer or offer a higher offer price in order to make its offer clearly superior and retain the Infigen recommendation," RBC analysts said in a note.

(Reporting by Shriya Ramakrishnan and Shashwat Awasthi in Bengaluru; Editing by Muralikumar Anantharaman and Jacqueline Wong)