Tuesday, June 18, 2024

Spanish energy firm Iberdrola threatens to halt further investment in Mexico

The Spanish energy company Iberdrola has threatened to stop investing in Mexico if the federal government doesn’t provide clarity about the policies that will apply to foreign companies.

CEO Ignacio Sánchez Galán said Wednesday that Mexican authorities must make it clear whether they are open to foreign and private investment or not.

Speaking during a presentation of Iberdrola’s latest financial results, Sánchez said the firm’s future plans will depend on the government’s response.

“If it says that it doesn’t want foreign investors to invest, we won’t,” he said, adding that the company will continue to invest in Mexico if the government indicates that it will welcome foreign capital.

Sánchez noted that Iberdrola’s investments in Mexico are small in comparison with those in other countries. However, it announced last year that it would invest US $5 billion in Mexico between 2019 and 2024, resources that now appear at risk.


President López Obrador did nothing on Thursday morning to allay the company’s concerns. He said he understood that “the company disagrees with the new policy to rescue the Federal Electricity Commission and Pemex.” But the government will not yield, he said, because “we have to defend the public interest.”

Problems between the energy company, a huge producer of wind power, and the federal government began last year when the Federal Electricity Commission (CFE) announced that it would review the terms of natural gas contracts with private firms, including Iberdrola.

The firm said in June that it was canceling its US $1.2-billion combined-cycle plant in Tuxpan, Veracruz, because it was unable to reach a natural gas supply agreement with the state-owned CFE.

President López Obrador subsequently predicted that the government would reach an agreement with Iberdrola but that hasn’t happened.

Tuxpan Mayor Juan Antonio Aguilar Mancha said earlier this month that it was disappointing that the project wasn’t going ahead because it would have created a large number of jobs and generated a significant economic spillover in the area.

López Obrador says that he does welcome foreign investment but he is also committed to strengthening the CFE and Pemex, the state oil company.

Some policies enacted by his government have made it harder for foreign and private companies to enter into and operate in the energy industry, triggering criticism from business and some foreign government officials including United States ambassador to Mexico Christopher Landau.

The government has shown particular hostility to renewable energy companies, publishing a new policy in May that could effectively prevent the sector’s expansion in Mexico.

The attempts to clamp down on private investment in the energy sector are ongoing.

The Financial Times reported last week that it had seen documents that showed that the energy regulator CRE is implementing an appeal issued by López Obrador to regulators last month to ban new energy permits. The ban would cover everything from renewables generation to gas stations, the Times said.

The government’s rule changing energy policies have triggered a flood of injunction requests from both energy companies and environmental groups, some of which have been granted.

In addition, the Supreme Court suspended the Energy Ministry’s new energy policy in June, ruling that it violated the constitutionally enshrined principles of free competition because it placed a range of restrictions on the renewable sector including limits on the number of permits that can be issued for new wind and solar projects.

At a session on Wednesday, justices of the Supreme Court’s first chamber unanimously upheld the decision handed down by Justice Luis María Aguilar Morales in June, ruling that a challenge presented by the president’s office that sought to overturn the suspension was groundless.

The president said Thursday that a constitutional amendment was under consideration as a result, so as to protect the public interest in the development of natural resources.

Source: El Universal (sp) 

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