Iberdrola may not need to exit Mexico amid allegations of electricity generation via illicit activities: Sheinbaum (paraphrased)
In a recent development, the sale of Iberdrola's power plants in Mexico has become a topic of speculation, with the global leader in electric power generation potentially exiting the Mexican market. This shift could be a result of the illegality of self-supply societies, which constituted a significant part of Iberdrola’s generation scheme in Mexico.
The Mexican authorities have declared that self-supply companies are illegal under current law, creating legal uncertainty for Iberdrola’s operations that relied heavily on these structures. This uncertainty is further compounded by the recent legislation enacted in March 2025, which requires the state-owned Federal Electricity Commission (CFE) to generate at least 54% of all electricity fed into the national grid. This law effectively limits the scope and market share of private electricity producers, including Iberdrola.
Claudia Sheinbaum, the President of Mexico, addressed this issue during her morning press conference today, stating that there are mechanisms in place for private investment to participate in Mexico, as long as they follow established rules. However, the evolving legal environment—focused on restoring state control over electricity and banning previously common private self-supply schemes—has created substantial uncertainty and legal risk for private investors.
Iberdrola, in response to these challenges, is actively seeking to sell its remaining power generation assets in Mexico as part of a global divestment strategy. The company has hired Barclays to advise on a sale deal reportedly worth around EUR 4 billion (USD 4.69 billion), signaling a full exit from the Mexican market.
Despite Iberdrola's 4 million euro investment in renewable energy projects in Mexico, the company's generation activities in self-supply societies may have been in violation of Mexican law, potentially leading to legal consequences. The illegality of self-supply societies may have played a role in the speculation regarding the sale of Iberdrola's plants in Mexico.
In summary, the illegality of self-supply societies and new laws requiring majority state generation have reshaped Mexico’s electricity generation market and significantly impacted Iberdrola’s position there. The company is now preparing to fully exit Mexico through the sale of its assets, a move that could have far-reaching implications for the Mexican energy sector.
- The evolving legal environment in Mexico, centered on the illegality of self-supply societies and the increased state control over electricity generation, has created legal uncertainty for companies like Iberdrola, potentially leading to an exit from the market.
- The Mexican government's crackdown on self-supply companies and the enactment of laws favoring state-owned electricity generation could have implications for the energy industry's finance sector, as investors may reconsider their investment in private electricity producers.
){kind=link}