MEXICO, April 13, 2023 -- Spanish power company Iberdrola will seek to expand in the United States and take advantage of its green subsidies after announcing the sale of gas assets worth $6 billion in Mexico, Chief Financial Officer Jose Sainz said on Wednesday.
The sale significantly reduces the renewable energy giant's exposure to Mexico, where its relationship with the government has been fraught. It allows it to speed up growth north of the border.
"The United States is the country that brings more opportunities in the medium and long term," Sainz told analysts in a conference call, referring to a massive package of subsidies in the U.S. Inflation Reduction Act.
President Andres Manual López Obrador (also known by his initials AMLO) has defended buying 13 electric power plants from the Spanish company Iberdrola, insisting that Mexico will see a return on the investment within ten years.
In his morning press conference, AMLO confirmed yesterday that the $6 billion deal to purchase the plants, announced on April 4, would be completed in the next 45 days.
The President defended the decision to purchase the 13 power plants, noting that they were built more recently than many CFE sites. (lopezobrador.org.mx)
“This investment is profitable; it will be recovered in a maximum of ten years,” he said. “It is guaranteed there will be no lack of electricity, the country will continue to grow, the demand for electric energy, and we need to guarantee the energy.”
The President also hit back at critics – including some energy experts – who have suggested the price for the plants was too high, given that many have been operating for between 10 and 25 years already and may have a limited useful life ahead of them.
“This park of plants, 13 plants, 12 combined cycles, and one wind, have an average useful life three times higher than the average useful life of the Federal Electricity Commission (CFE) [plants],” he said.
The list of plants in Mexico that Iberdrola is selling. Twelve of them are combined-cycle plants. La Venta III is a wind farm. (Government of Mexico)
“They are newer than the [average] CFE [plant], and for what reason? Because what they wanted was for the CFE plants to become scrap, as they did with petrochemicals, so that the CFE would leave the electricity market and the entire market would be in the hands of individuals.”
AMLO has hailed the Iberdrola purchase as a “new nationalization” of Mexico’s electricity industry. It increases the state-owned CFE’s share of Mexico’s electricity generation from 39% to 55%.
The president has long pursued an energy policy that favors CFE and state-owned oil company Pemex over private energy companies. He has been particularly critical of Iberdrola, accusing the Spanish company of “looting the country.”
The 13 plants from Iberdrola are primarily located in northern Mexican states: three each in Tamaulipas and Nuevo León; two each in San Luis Potosí and in Sinaloa; and one each in Durango, Baja California, and Oaxaca. They have a combined electricity generation capacity of 8,539 megawatts. The oldest plant opened in 1998. The newest opened in 2022.
The new power plants are predominantly located in the north of the country. (Iberdrola)
“If we tried to build these 13 plants, it would take us ten years,” AMLO said.
He said the purchase would be complemented by two new combined cycle plants in Yucatán, the modernization of 12 existing hydroelectric plants, and investments in solar plants in Sonora.
AMLO’s nationalist energy policy was a key part of his electoral agenda, but private sector analysts argue it will economically damage Mexico and slow its green energy transition.
Despite the president’s optimism, Monday saw the Center for Economic Studies of the Private Sector call the Iberdrola to purchase a “bad decision” that would create future maintenance expenses and give “a negative signal towards investment.”