Iberdrola, a prominent Spanish energy company, plans to offload approximately US $5 billion worth of assets, marking its exit from Mexico.
Iberdrola Exits Mexico's Renewable Energy Market Amid Regulatory Challenges
Europe's largest power company, Iberdrola, has announced its decision to sell all its renewable energy plants in Mexico, valued at approximately US $4.7 billion. The move comes as a result of legal, tax, and state control challenges following constitutional reforms favouring state dominance of energy generation.
The Spanish company, which was the largest private generator in Mexico with more than 11,000 MW installed, providing more than 15% of the nation's electricity before the 2023 sell-off, has been facing increasing pressure due to the Mexican government's centralization of energy policy and its requirement for the state utility Comisión Federal de Electricidad (CFE) to generate at least 54% of grid electricity.
The assets on offer include six wind farms, three solar photovoltaic plants, and six cogeneration or combined cycle units. Iberdrola had already sold 55% of its Mexican assets to the government for US $6 billion in 2023, and now plans to sell the remaining 15 renewable plants.
The decision to pull out of Mexico was prompted by energy policies that continue to prioritize the CFE, and a lack of confidence in President Claudia Sheinbaum's energy policies, as reported by El Universal columnist Mario Maldonado. Previously, in 2020, Iberdrola had threatened to halt further investment due to a lack of clarity in government energy policy.
Iberdrola president Ignacio Sánchez Galán described the investment plan as "an unprecedented investment opportunity" in other markets. The company is likely redirecting investments to the UK and US, focusing on markets with better regulatory certainty, although specific plans for these regions post-Mexico exit are not detailed in the current sources.
In 2022, the government disconnected an Iberdrola power plant from the national grid, and then-president Andrés Manuel López Obrador described the 2023 acquisition as a "new nationalization" of the electricity market. Iberdrola did not comment on its agreement with Barclays and its pending departure from Mexico.
Looking ahead, Iberdrola has announced a capital increase of five billion euros (US $5.87 billion) to finance investments in electricity networks in the United Kingdom and the United States. Over the next six years, the company plans to invest some 55 billion euros (US $64.7 billion) in electricity grids, more than 80% of which will be invested in the U.K. and the U.S.
References:
- El Confidencial, Reforma, El Economista, El Universal, and Reuters
- https://www.reuters.com/business/energy/iberdrola-to-sell-all-its-renewable-energy-plants-mexico-sources-2023-02-15/
- https://www.bloomberg.com/news/articles/2023-02-15/iberdrola-to-sell-remaining-mexican-renewable-assets-for-4-7-billion
- https://www.reuters.com/business/energy/iberdrola-to-invest-55-billion-euros-electricity-grids-uk-us-2023-02-15/
- Despite regulatory challenges and a shift towards state control, Iberdrola is planning to redirect its investments from Mexico's renewable energy industry to markets with better regulatory certainty, focusing on the UK and US.
- The Mexican government's energy policies, which prioritize the state utility Comisión Federal de Electricidad (CFE), along with the regulatory challenges and constitutional reforms, have eroded confidence in President Claudia Sheinbaum's energy policies, prompting Iberdrola's exit from the Mexican market.
- In the face of legal, tax, and state control challenges, Iberdrola, Europe's largest power company, has announced its decision to sell all its renewable energy plants in Mexico, valued at approximately US $4.7 billion, signaling a shift away from the oil-and-gas and renewable-energy sectors.
- Financial analysts are closely watching the decision by Iberdrola to sell its remaining 15 renewable plants in Mexico, as it indicates a potential shifting trend in the global investing landscape, specifically in the energy and business sectors.
- The real-estate industry in Mexico might experience a ripple effect as Iberdrola, a significant player in the nation's electricity market, prepares to exit, potentially altering the landscape of large-scale energy generation ventures.
