Iberdrola sells assets in Mexico to a public company after its clashes with López Obrador

Iberdrola has announced the sale of 80% of its generation assets in Mexico for 6,000 million dollars —some 5,479 million euros—.

The group has communicated this Tuesday to the National Securities Market Commission (CNMV) that the subsidiaries Iberdrola Generación México and Iberdrola Renovables México have signed an agreement of intent with the company owned by the Mexican State Mexico Infrastructure Partners (MIP) so that a private trust managed by MIP acquires the entire capital of several companies that own generation plants.

The total installed capacity subject to the transaction is 8,539 megawatts (MW), of which 8,436 correspond to combined gas cycles and 103 to an onshore wind farm.

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combined-cycle gas plants

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All of them operate under the regime of Independent Power Producers contracted with the Federal Electricity Commission.

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private gas combined cycle plants

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With this operation, the group is left with only 2,427 MW of the almost 11,000 it had in the country.

1,166 MW of these correspond to combined cycle plants, 202 MW to cogeneration and 1,059 MW to renewables.

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The agreed valuation for the sale of these assets ("in terms of company value or

, free of cash and debt, of the companies that own the assets", states the statement sent to the CNMV) amounts to nearly 6,000 million of US dollars.

This amount, the group qualifies, could be modified depending on the closing date of the transaction and other "possible usual adjustments in this type of agreement."

Meeting at the National Palace

The president of the energy company, Ignacio Sánchez Galán, and the president of Mexico, Andrés Manuel López Obrador, met this morning at the National Palace and announced the start of a new stage after the signing of the agreement, as reported by the company.

Both have committed to advancing the development of renewable energy in the country, a sector in which Iberdrola continues to be a leader.

"The agreement reached with Iberdrola, which allows progress in the implementation of Mexico's new energy policy, marks the beginning of a new stage in which the company will actively participate in the country's renewable development," said the President of Mexico.

Sánchez Galán, for his part, has indicated that "Iberdrola appreciates the support and flexibility shown by the Government of Mexico to reach this agreement, while considering Mexico a strategic country with potential for growth and expansion where it will show its support for Mexico and the State developing renewable capacity”.

The divestment announcement comes shortly after Mexican President Andrés Manuel López Obrador openly criticized several Spanish companies operating in the country.

"They abused our country and our peoples," he stated in mid-February 2022, referring to Repsol, OHL and Iberdrola itself.

Specifically, the North American president – ​​the author of several controversial statements towards Madrid in the past – accused the group led by Ignacio Sánchez Galán of lobbying

press against the electricity reform, one of the key measures of his government program.

One of its objectives is to strengthen the public sector before private investors.

In 2020, Iberdrola canceled a million-dollar investment for a combined cycle plant on the Atlantic coast of Mexico after the state-owned electricity company, the Federal Electricity Commission (CFE), did not authorize the gas supply that the plant needed to operate.

The Government responded by saying that it would assume the investment.

In addition, last year the Mexican regulator, the Energy Regulatory Commission, fined Iberdrola 9 billion pesos (about $466 million at the time) for breaking the law by selling electricity to its partners.

The ruling came from a lawsuit filed by CFE.

Approvals

The operation is subject to the agreement and the signing of the final contracts by the parties, as well as the obtaining of the necessary regulatory approvals and the fulfillment of certain usual conditions in this type of agreement.

The company has reported that the transaction has the financial backing of the National Infrastructure Fund of Mexico (FONADIN) and other public financial entities linked to the Mexican Government.

Iberdrola México, the group has assured in the note sent to the CNMV, will continue to provide service to its current clients in that country and, temporarily, to the companies included in the perimeter of the operation, for which it is expected to enter into purchase and sale contracts for energy with the companies that are transferred in order to provide the companies of the Iberdrola Group with the energy and power necessary to develop renewable generation in Mexico and meet their current and future objectives in the country.

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