Iberdrola is selling the bulk of its Mexican power generating assets to a state-backed fund for $6bn, using the proceeds to accelerate its investments in the US and Europe.
The Spanish group’s move comes after years of pressure on the company from the leftist government of President Andrés Manuel López Obrador, who hailed the purchase as a “new nationalisation”.
The Mexican leader has taken a particularly hostile stance towards Spanish corporate investment because of the country’s colonial history and the deal satisfies López Obrador’s ambitions to increase the proportion of electricity generation in state hands.
José Sainz Armada, Iberdrola’s chief financial officer, citing the large green investment incentives in the US’s Inflation Reduction Act, said: “The US is probably the country that brings more opportunities for the medium and long term.”
But the company has also become more positive on the EU in recent months as the region’s own green investment plans advance, including the REPowerEU programme to overhaul the energy sector.
Iberdrola’s shares rose 2 per cent to €11.65 by early afternoon on Wednesday in Spain following the announcement, extending recent gains.
López Obrador called the deal a “new nationalisation” and a “historic day” in a video of him at a meeting with Iberdrola executives, including the company’s executive chair Ignacio Galán. The deal would increase the share of Mexico’s state-owned power company CFE to 55.5 per cent of the market, the president said, from just under 40 per cent now.
Mexico Infrastructure Partners, a fund run by a private asset manager but financed by the government, will take control of 13 combined cycle generation plants and one onshore wind farm, subject to final details and approvals, Iberdrola said.
Iberdrola was one of Spain’s largest investors in Mexico and a major beneficiary of the energy sector’s opening to private sector investment in 2013. But the company has also been a prime target of López Obrador since he took office and dramatically reshaped energy markets in favour of state companies.
López Obrador has regularly attacked Iberdrola in his morning news conferences, accusing the company of unspecified acts of corruption and of lobbying against him. Mexico’s regulator last year fined the company $466mn for allegedly breaking the law by selling power to partner companies. Iberdrola denied any violation and successfully appealed against the ruling, prompting the president to criticise the judge.
Last year the Mexican president attempted to change the constitution to give the CFE more control over the power market but failed to muster the necessary two-thirds majority in congress.
Sainz Armada stressed that the company was not leaving Mexico entirely and said the deal should yield “a much better relationship with the Mexican government”. The assets sold represent 77 per cent of Iberdrola’s installed capacity in Mexico.
The Spanish company, a big global player in renewable energy, said the transaction matched its goal of reducing its ownership of facilities that produce greenhouse gas. It said it would cut the proportion of gas in its global power mix from 30 per cent to about 15 per cent.
Iberdrola said it will continue to own some assets in Mexico and expects to earn $400mn in revenue a year from them. They include a remaining gas plant that will generate $150mn a year and renewable facilities with revenues of $200mn.
While Iberdrola pledged to keep investing in new wind and solar power projects in the country, Sainz Armada acknowledged continued regulatory uncertainty. “We have to wait a little bit to see what is the new policy after this deal of the Mexican government,” he said.
Additional reporting by David Sheppard in London