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The Spanish firm Iberdrola has been a major investor in Mexico's energy sector. Iberdrola has been a major investor in Mexico's energy sector.

Spanish firm reported to have canceled US $1.2-billion investment

Iberdrola, accused of improper conduct by the president last week, was set to build a new plant in Veracruz

The Spanish energy company Iberdrola is canceling a US $1.2-billion project in Veracruz, according to government officials.

The mayor of Tuxpan told the news agency Bloomberg that representatives of the firm told him that it was canceling its combined-cycle plant in the city because in nine months it has been unable to reach a natural gas supply agreement with the state-owned Federal Electricity Commission (CFE).

“The company received orders from corporate headquarters in Spain to leave. They had everything ready and were just waiting on the gas contract to get started,” Juan Antonio Aguilar Mancha said.

In a separate interview with the newspaper Reforma, the mayor expressed regret about the decision, explaining that the project would have generated 2,000 local jobs.

However, Aguilar told Bloomberg that Iberdrola could continue with the project if it reaches a gas supply deal with the CFE or TC Energy (formerly TransCanada Corporation) in the next two weeks.

He said the firm has been working on the project for more than a year and has spent about $40 million thus far to purchase land, obtain permits and pay workers. Construction of the plant was scheduled to begin in July.

Reforma and Bloomberg asked Iberdrola to comment on the cancellation but it declined.

Meanwhile, Veracruz Governor Cuitláhuac García tweeted on Wednesday that the Tuxpan plant will go ahead but the CFE will operate it.

“I spoke with … [federal] Energy Minister Rocío Nahle and she confirmed that the Tuxpan project remains but it’s a CFE project. The state company will call for bids for its construction … [and] Veracruz companies will have the opportunity to work on it,” he wrote.

News of Iberdrola’s decision to cancel the project and its apparent takeover by the CFE comes two weeks after President López Obrador claimed that the Spanish company has a monopoly in Mexico’s electricity sector.

He said Iberdrola produces almost half of the power injected into the national grid by private companies and accused the firm of improper conduct because it has hired former federal energy officials.

If Iberdrola’s cancellation of its power plant is confirmed, it will be the first major investment cancellation in the electricity sector since the federal government announced a new energy policy that imposes restrictive measures on renewable energy and seeks to consolidate control of power generation in the CFE.

Bloomberg reported that it wasn’t clear whether Iberdrola’s inability to reach a gas supply deal with the CFE was related to the government’s stance on electricity generation by private companies or López Obrador’s recent criticism of the firm.

Iberdrola has invested heavily in Mexico and the Tuxpan plant was part of a $5-billion investment plan that includes other power generation facilities and a solar park.

The former government’s energy reform opened up greater investment opportunities for private and foreign firms but López Obrador now appears intent on limiting their participation.

He claimed last month that private companies, including those that generate clean, renewable energy from sources such as wind and solar, have provided “nothing” to the national electricity system even though data shows that they generate a significant proportion of the power used in Mexico, and at a cheaper price than the CFE.

The Federal Economic Competition Commission has warned that electricity rates could go up if the CFE ramps up energy production at the expense of new renewable energy projects but López Obrador has pledged that there will be no price hikes while he remains in office.

“I’m not going to break my commitment to maintain the price of electricity. … It won’t increase during my entire six-year term,” he said last week.

Source: Reforma (sp), Milenio (sp), Bloomberg (en) 

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