Mexico finalizes Iberdrola plants acquisition

June 15, 2023

Durango Iberdrola — One of the Iberdrola plants sold to the government, located in the state of Durango. (Iberdrola)

The federal government has formalized its purchase of 13 power plants from Spanish energy company Iberdrola.

The Ministry of Finance and Public Credit (SHCP) announced Monday that the government had signed an agreement to purchase the plants for approximately US $6 billion.

{Mexico's President Lopez Obrador and Iberdola — President Lopez Obrador and Iberdrola CEO Ignacio Galán have had their differences in the past over the president’s energy policies. In 2020, Galán threatened to stop Iberdrola from investing any more in Mexico. (Cuartoscuro)

“The contract confirms the terms and conditions of the agreement that the president of the republic, Andrés Manuel López Obrador, announced on April 4,” the SHCP said.

The ministry noted that the government has purchased 12 combined-cycle plants and one wind plant, with a combined capacity of 8,500 megawatts. The combined-cycle plants are in Baja California, Durango, Nuevo León, San Luis Potosí, Sinaloa and Tamaulipas, while the wind plant is in Oaxaca.

“The closure of the operation between Iberdrola México and the trust [known as] Mexico Infrastructure Partners [MIP] was carried out through a national investment vehicle with the majority participation of the National Infrastructure Fund of Mexico and with bank financing,” the SHCP said.

“This action provides legal certainty to the objective of the current administration to recover the percentage of electricity generation that allows energy sovereignty to be reestablished,” it said.

The purchase of the Iberdrola facilities has been criticized by some economic think tanks, but the government claims the acquisition will help Mexico to achieve its goal of energy independence. (Iberdrola/Twitter)

At his morning news conference on Thursday, López Obrador reiterated that the purchase of the plants from Iberdrola allows the state-owned Federal Electricity Commission (CFE) to increase its share of Mexico’s electricity generation market to 55%. The CFE’s share of the market before the purchase was just under 40%.

“It’s like a second nationalization of the electricity industry. … We’ve now recovered these plants for the nation,” said López Obrador, who asserts that his government is “rescuing” the CFE after years of neglect.

Some energy experts have questioned the wisdom of the government’s decision to buy the 13 plants because of their age and the cost of the transaction.

Iberdrola, which has been a major investor in Mexico’s energy sector, said in a statement that the trust led by MIP had acquired 55% of its “gross-operating profit (EBITDA) in the country, including the associated contracts and more than 410 related jobs.”

The abbreviation EBITDA stands for the economic phrase in English: “Earnings Before Interest, Taxes, Depreciation and Amortization.”

“Iberdrola will keep 13 plants, all its activity with private customers and its portfolio of renewable projects to continue increasing its wind and solar assets in the country in the coming years,” said the firm, which also noted that Mexico’s Energy Regulatory Commission recently authorized its generation permit for a 105-megawatt wind farm in Guanajuato.

With reports from El Universal, Milenio and El Financiero