Iberdrola, a significant player in the energy sector from Spain, plans to offload US $5 billion worth of assets, marking its departure from Mexico.
Iberdrola Exits Mexico's Renewable Energy Market
Iberdrola, Europe's largest power company, is bidding farewell to Mexico's renewable energy sector due to concerns about legal and tax stability under Mexico’s current federal administration. The Mexican government's shift towards state control of electricity generation and regulatory overhaul favoring the Comisión Federal de Electricidad (CFE) have prompted Iberdrola's decision to exit.
The Spanish company has announced its intention to sell all of its 15 renewable energy plants in Mexico, including wind farms and large photovoltaic parks in Puebla. According to reports, the assets are valued at approximately US $4.7 billion. In 2023, Iberdrola had already sold 55% of its Mexican assets to the Mexican government for US $6 billion.
The Mexican government's policies continue to prioritize the CFE, restricting private companies like Iberdrola to a minority 46% share. The government has enacted legislation requiring the state utility to generate at least 54% of the nation’s electricity. Furthermore, energy regulators have been replaced by a centralized state-driven commission, overturning past liberalization policies that encouraged foreign investment in Mexico’s electricity sector.
Iberdrola's exit from Mexico may signal a strategic shift towards more stable and supportive markets for renewable investments. While specific details about Iberdrola's investment plans in the UK and US are not explicitly provided, it is consistent with recent global energy trends that Iberdrola is likely reallocating capital to these markets. This aligns with reports of a "global divestment push," suggesting Iberdrola's strategic repositioning outside Mexico.
Before the 2023 sell-off, Iberdrola was the largest private generator in Mexico, providing over 15% of the country's electricity. However, the current move to sell all renewable energy plants in Mexico is due to concerns about Mexico's financial and legal stability. The sale process is ongoing, but no further information about its current status has been provided.
The decision to sell its Mexican assets has not been without controversy. Then-president Andrés Manuel López Obrador described the acquisition as a "new nationalization" of the electricity market. Iberdrola has been a frequent target of López Obrador, who sought to give state-owned electricity utility CFE majority control over the local power market.
Despite the challenges in Mexico, Iberdrola remains optimistic about its future. Iberdrola president Ignacio Sánchez Galán described the plan as "an unprecedented investment opportunity." Over the next six years, Iberdrola 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. This investment is expected to position Iberdrola as a key player in the global renewable energy market.
References:
- El Confidencial
- Reforma
- El Economista
- El Universal
- Reuters
- Iberdrola, the Spanish firm that dominates Europe's energy industry, is leaving the renewable energy market in Mexico due to concerns about the stability of the current federal administration's policies.
- The Spanish company's assets in Mexico, worth approximately $4.7 billion, include 15 renewable energy plants — wind farms and large photovoltaic parks in Puebla.
- The Mexican government's policies continue to prioritize the Comisión Federal de Electricidad (CFE), restricting private companies like Iberdrola to a minority 46% share, as required by legislation.
- This strategic shift by Iberdrola may signal renewed interest in more stable and supportive markets for renewable energy investments, such as the UK and USA, as the company faces challenges in Mexico.
- Politics and policy-and-legislation changes in Mexico, including the state's takeover of electricity generation, have created uncertainties that have prompted Iberdrola to reconsider its investments, despite its previous significant involvement in Mexico's energy sector.
- The oil-and-gas industry and the business sector worldwide will monitor Iberdrola's investments in the UK and USA, as this renewed focus could contribute to the overall growth and expansion of the renewable energy sector in those regions.
- The sale process for Iberdrola's Mexican assets is ongoing, and developments in the business real-estate market may provide insight into the impact of Iberdrola's exit on the renewable energy industry in Mexico.
