López Obrador celebrates the purchase of Iberdrola plants with an electoral event

As of today, Iberdrola ceases to be the largest private electricity generating company in Mexico and President Andrés Manuel López Obrador celebrated it by visiting a plant that he assured is “one of the first that began in the privatization period” prior to his Administration .

On Monday, Iberdrola received the $6.2 billion that Mexico paid for 13 generators in a transaction conditioned by the antitrust regulator.

In exchange, it gave up 55% of its business in Latin America's second economy.

“We are supporters of the mixed economy,” said López Obrador at the electoral-tinged ceremony in which a small plaque marking the “nationalization” of what was an Iberdrola plant was unveiled.

Also on stage were the president of the Spanish company Ignacio Sáchez Galán, the Secretary of the Treasury Rogelio Ramírez de la O and the general director of the state company Compañía Federal de Electricidad (CFE), Manuel Bartlett.

“I told them 'let's see, let's make an agreement: 54% public interest, 46% private interest.

We're going to fix ourselves like this,'” the president shared.

Before his arrival in the municipality of Tamazunchale, in the north-central part of the Republic, during his morning press conference, López Obrador explained that the facilities chosen for the ceremony were special because of their history.

“We are going to a plant that until yesterday belonged to Iberdrola, until yesterday, and it has already been acquired.

This plant is very important because it was one of the first to begin during the period of privatization of the electricity industry;

So, it is very symbolic that they go to that plant, which now becomes a public company, returning the private to the public,” said the president.

Iberdrola, whose expansion in the country had made it the largest generator of electricity in the private sector, was the target of attacks by López Obrador.

The president recognized it, saying: "We agreed at the beginning, believe it or not, but neither he nor I are up for lawsuits," he said, referring to Sánchez Galán, for whom he asked for applause.

"This agreement is a consequence of the meeting that we held just four years ago in the National Palace in which he indicated to us the main lines of his energy policy and conveyed to us his desire for us to begin a constructive and open dialogue to reach an agreement that would make effective that policy,” said Sánchez Galán.

López Obrador and Ignacio Sánchez Galán during the meeting for the acquisition of the plants, in April 2023. Presidency

To pay for the acquisition of the assets, the public debt will increase by $2.42 billion, Ramírez de la O reported during his speech.

“We will promote the use of savings in pension funds, Afores and other institutional investors that thus participate in the usefulness of operations for the benefit of the workers and people of Mexico,” said the official, referring to the capital that remains collect

“With the addition of the capacity of the plants that are included in this operation, the capacity of the Mexican State, including the CFE, will go from 39% of total generation to 56%,” added Ramírez de la O.

Competition conditions

On February 15, the Federal Economic Competition Commission (Cofece) authorized the purchase of Iberdrola's assets by the public trust National Infrastructure Fund (Fonadin) under certain conditions.

The Fund made the acquisition through a private financial vehicle from the company Mexican Infrastructure Partners.

To guarantee competition in the market, Cofece imposed the condition that Fonadin does not have a stake greater than 51%, that the 8,500 megawatt park is not also operated by the State, but by an independent operator, and prohibited the exchange of sensitive information between competitors.

Once the conditions were accepted, the transaction was carried out and it is now up to Cofece to ensure that the conditions are met for ten years.

“This is going to mean that the Federal Electricity Commission [the state company] and the government, which belongs to the people, already has more than 50% of the electricity generation so that it continues to be supplied to all users, all consumers of cheap, non-profit electrical energy,” López Obrador said Tuesday morning at a press conference.

Whether this makes the State the preponderant generator of electricity is a question subject to interpretation.

Although the State is the owner of the plants, Cofece imposed a condition that the State itself cannot operate them.

However, López Obrador has assured on several occasions that with the purchase, the CFE will have more than 50% of the national generation.

The state-owned company reported on Tuesday a 16% higher profit in the last quarter of last year compared to the same quarter in 2022, the company reported in a statement.

In the annual comparison, the total annual income for 2023 amounted to 644,361 million pesos, a figure 3.8% higher than the accumulated annual income for 2022. Its profit is the highest in 10 years, the CFE assured.

“The above was driven by higher sales of electrical energy,” reads the statement, “at the sector level, the highest demand for electricity in 2023 was recorded mainly in domestic, industrial, agricultural and commercial users, in line with the growth of the economy. Mexican observed in the same period of 3.2%”.

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