Iberdrola rules out new investments in Mexico due to obstacles to private electricity generation

Iberdrola headquarters in Madrid.Andres Kudacki / AP

Iberdrola puts the brake on investment in Mexico.

The president of the Spanish company, Ignacio Sánchez Galán, this Wednesday ruled out new investments in the Latin American country until the regulatory framework is clarified.

The multinational, like the rest of the sector, has faced the growing obstacles imposed by the Mexican government to limit private participation in this area and, in addition, it has become a frequent target of criticism from President Andrés Manuel López Obrador, promoter of an energy policy with a nationalist tinge.

Sánchez Galán has tried to minimize the impact of the turbulence in the Mexican market, which accounts for 8% of the group's total income, "very little on the balance sheet," in the businessman's words.

"We are not making energy policies, governments are making them," he said during the presentation of financial results.

"If they say not to invest in strategic companies, we will not."

In the first nine months of the year, its net profit in Mexico has fallen 23% compared to the same period in 2019, with a balance of about $ 273 million, according to the company's accounts presented this Wednesday.

The warning from the CEO of the multinational represents a 180 degree turn.

A year and a half ago, in a visit to Mexico in which he met with senior government officials, Sánchez Galán announced investments of 5,000 million dollars during López Obrador's administration and expressed his commitment to “the energy and economic development of Mexico, the strengthening of its industrial sector and the generation of quality employment ”.

Iberdrola landed in the country in 1999 and over the years has become the largest private electricity producer in the country, with 10,000 MW of installed capacity in almost thirty plants.

Since then, the picture has turned blacker.

Of the 5,000 million dollars, Iberdrola has barely invested around 550 million in two plants, according to company sources.

The Tuxpan combined cycle power plant, in the State of Veracruz, in which it had planned to disburse about 1 billion dollars and whose development was in an advanced stage, is halted due to the obstacles that the CFE has placed on the supply of gas required by the plant.

Recent negotiations to secure supply through private suppliers have also failed.

Iberdrola has been attacked by the president in his morning conferences.

López Obrador has even accused her of "looting" and corruption, without presenting evidence.

The appointment of former president Felipe Calderón, rival of the current president, as a director in one of its subsidiaries, has also been a source of rispidity.

In September, López Obrador and company executives had a telephone conversation.

"I spoke with him on very good terms to tell him that we are in the best position to have contracts reviewed and the rule of law to be maintained," said the president.

But attempts to unblock the relationship have collided with the approval of new regulations restricting the operation of private plants in an apparent attempt to favor the parastatal power company, the Federal Electricity Commission (CFE).

A few weeks ago, the Energy Regulatory Commission limited the possibility of adding new partners to self-supply schemes, associations whereby private power plants supply electricity to factories and businesses.

It was the latest in a series of measures that Iberdrola and other companies in the sector have taken to court on the grounds that they violate the legal framework.

While Mexico loses attractiveness as an investment destination, electricity is turning to other markets.

Sánchez Galán announced on Wednesday the purchase of the US company PNM Resources, active in Texas and New Mexico, for $ 4.318 billion.

"The operation is a consequence of the strategy we have followed for more than 20 years: friendly operation, focused on regulated businesses and renewable energies, in countries with good credit ratings and legal and regulatory stability and that offer opportunities for future growth", he said. saying.