The Mexican antitrust regulator sets conditions for the state purchase of 13 power plants from Iberdrola

The Federal Economic Competition Commission (Cofece) has set conditions for the López Obrador Government to authorize the purchase by the State of 13 Iberdrola power plants.

The antitrust body has resolved that the acquisition of this electrical package, for which the federal Administration will pay 6,000 million dollars, will depend on some commitments.

Among them, generation plants must operate independently in the market and avoid exchanges of sensitive or strategic information between competitors.

Once the parties expressly and unconditionally accept the Cofece conditions, it will authorize the operation.

If they fail to comply with the conditions once accepted, they will be sanctioned.

In addition, the antitrust body requires the National Infrastructure Fund to reduce and maintain its investment by a maximum of 51%, which must be completed within a period of 24 months.

“An independent professional administrator (MIP) must be appointed, who is in charge of making decisions related to the operation of electricity generation plants in the market and controls and mechanisms must be established that oblige the people in charge of the operation of "electric generation plants to act independently and without conflict of interest," Cofece said in its statement.

The plenary session of Cofece has discussed for three days in an extraordinary closed-door session the mega-purchase of the electricity package, the file of which came into its hands last September.

The operation includes 12 combined cycle power plants, for 8,436 megawatts, and a wind farm in Oaxaca with a capacity of 103 megawatts.

Among the combined cycle plants that the CFE will operate are Monterrey I and II, Altamira III and IV, Altamira V, Escobedo, La Laguna, among others.

The antitrust regulator in Mexico is the authority in charge of verifying that these business agreements comply with the country's economic competition laws and that they will not give rise to the formation of market concentrations.

In this case, the CFE will operate the assets, but will not be the owner of the plants.

The private company Mexico Infrastructure Partners FF – administrator of the financial vehicle of the mega transaction – will be the owner of the assets.

As an operator, the CFE will only obtain a fixed or variable consideration for the energy generated in these factories, but not direct income.

The Government announced last year in style and under a narrative of “nationalization” the agreement with Iberdrola to acquire the 13 electric power plants that already operate in the country.

Since the founding of Morena, built in the image and likeness of President Andrés Manuel López Obrador, it has sought to make the State an important player in the energy sector.

The purchase formalized now is not actually a nationalization, but it is a victory for his political project.

To obtain these assets, the Ministry of Finance has launched a complex financing scheme involving the National Infrastructure Fund, commercial banks and a financial vehicle managed by Mexico Infrastructure Partners (MIP).

The contract between MIP and Iberdrola was signed last June.

MIP's Energy Director is Juan Carlos Zepeda, who served as president-commissioner of the National Hydrocarbons Commission (CNH) during the previous Federal Administration.

Gonzalo Monroy, an expert in energy issues, explains that all the income from the operation of these power plants will not go to the CFE, but to the fund created by the private MIP.

“Now, it becomes a problem for Mexico Infrastructure Partners because many of the plants purchased are already reaching their useful life and will require more preventive and corrective maintenance, that means that they will not come into operation and, therefore, they will not be receive income.

It was a very good operation for Iberdrola because it decarbonizes its portfolio in Mexico, Iberdrola gets money, eliminates headaches and obtains a more certain way to continue operating in Mexico,” he comments.

The specialist also details that although the purchase is leveraged by the Government, one cannot speak in fine terms of an electrical nationalization, as the Executive proclaims, since the assets will pass into the hands of MIP, a private company and not directly. to the coffers of the electrical parastatal, the CFE.

On the other hand, Iberdrola has already announced that it will invest the $6 billion from the transaction in renewable projects in Mexico.

The important ruling by Cofece on this mega purchase by the Government occurs just at a time when this autonomous body and a handful of other organizations are in danger of extinction due to the initiative that President López Obrador has sent to Congress to eliminate seven bodies autonomous and regulatory.

The proposal also includes the National Hydrocarbons Commission (CNH), the National Institute of Transparency, Access to Information and Protection of Personal Data (INAI) and the Federal Telecommunications Institute (IFT).

The López Obrador Government's intention to acquire Iberdrola's electricity park is part of its project to strengthen the energy parastatals, Pemex and the CFE.

In the past, before this purchase and sale agreement was finalized, the president had launched harsh attacks against the operations of the Spanish company in Mexico.

The president had described these contracts as “abusive.”

Months later, in April 2023, the president of Iberdrola Ignacio Sánchez Galán and López Obrador posed together and shook hands in the National Palace to seal the energy mega-purchase.

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