AMLO calls Iberdrola deal the “New Nationalization” of the electricity sector in Mexico

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MEXICO CITY, MEXICO.- Mexico’s president announced a deal on Tuesday, April 4th, to buy 13 of the power plants operated by the Spanish company Iberdrola in the country for an estimated $5.94 billion USD, calling it a “new nationalization” of the Mexican electricity sector.

The deal could put an end to President Andrés Manuel López Obrador’s years of verbally sparring with the company, along with fines and limits on its plants in Mexico.

López Obrador has long admired former President Adolfo López Mateos, who nationalized Mexico’s electrical industry in 1960. By the 2000s, decades of corruption, high domestic electricity rates, and under-investment led López Obrador’s predecessors to invite foreign companies in to build new, cleaner power plants.

On Tuesday, April 4th, López Obrador said the deal will give Mexico’s state-owned power company a 55.5% share of the electricity market. The utility, the Federal Electricity Commission, now produces just under 40% of Mexico’s electricity.

“This is a new nationalization of the electrical industry,” López Obrador said at a meeting with Iberdrola CEO Ignacio Sánchez Galán.

The plants to be sold represent about 80% of Iberdrola’s assets in Mexico, and Sánchez Galán said that “our desire is to continue working hand in hand with Mexico.”

Treasury Secretary Rogelio Ramírez said the deal could be completed in five months and would involve selling bonds to raise the cash to pay for the plants.

López Obrador likes state-owned companies, and he dislikes the openings to private investment enacted under previous administrations that allowed foreign firms to build cleaner gas, wind, and solar power plants in Mexico.

The Mexican president previously enacted an overhaul of the electrical power industry that sought to limit foreign-built renewable energy plants in Mexico and grant a majority market share to the Federal Electricity Commission.

The U.S. government has filed an objection to that, arguing that the U.S.-Mexico-Canada free trade agreement, known as USMCA, prohibits favoring domestic companies over those from other member states.

In 2022, Iberdrola was reportedly hit with fines amounting to nearly $466 million, after Mexican regulators claimed the company violated rules governing private electricity sales to companies. Those fines were later put on hold by a court. It is unclear if, under the terms of Tuesday’s deal, they will be waived.

Obrador has accused Spanish companies of acting like “Conquistadors” in Mexico, by using advantageous contract terms to avoid paying the cost of transmission for their power.

Source: El Financiero

The Mexico City Post