The announcement by the Mexican government regarding its purchase of 13 Iberdrola plants has sparked a heated debate amongst various sectors.
While some have welcomed the move, viewing it as a means of enhancing energy self-sufficiency and national sovereignty, others have raised concerns given President Andrés Manuel López Obrador’s past criticism of the Spanish company’s role in the country’s electricity sector.
This article will provide an overview of the agreement’s particulars, the types of plants involved, and whether or not it represents nationalization, as well as examine the question of whether Iberdrola will depart from the country.
Details of the Mexico-Iberdrola agreement
Iberdrola will sell 13 of its electricity generation plants in Mexico to the Federal Electricity Commission (CFE). This transaction signifies that the CFE will assume responsibility for the plants’ operation, economic benefits, and electricity generation.
According to Iberdrola’s report to Spain’s National Securities Market Commission (CNMV), the acquisition will be made by a private trust managed by the investment fund manager Mexico Infrastructure Partners (MIP).
Type of Plants Involved
The sale comprises 12 combined cycle plants and one wind farm. Combined cycle plants generate electricity using natural gas and steam. Although this approach to electricity generation is less polluting than coal, fuel oil, or diesel, it still produces some emissions. The plants possess a generation capacity of 8,436 megawatts (MW).
Does It Represent Nationalization?
Despite Secretary of Finance Rogelio Ramírez de la O’s video explanation that the National Infrastructure Fund (Fonadin) will hold the majority of the capital in this transaction and will serve as the special vehicle for refinancing the operation, energy experts have pointed out that this is not a nationalization.
Economist Víctor Gómez Ayala argues that while public resources will be involved, and the plants will be operated by the CFE, the Mexican state will not own the assets. Instead, a private entity will possess the assets through an investment vehicle known as Development Capital Certificate.
Is Iberdrola Leaving the Country?
It is unclear whether Iberdrola will depart from the country. The Mexican Institute for Competitiveness (IMCO) argues that “having public sector financing does not alter the fact that legally, the ownership of the plants will remain private.”
Iberdrola also asserts that “it will not contribute to Mexico’s public debt because it is off the public’s balance sheet and because it is a vehicle capable of going to the market to refinance this transaction.” The amount of resources with which Fonadin and other public entities will participate in the acquisition is currently unknown.
Impact on the Energy Sector
According to the federal government’s estimations, the CFE’s share in the generation of all the country’s energy would increase from 39.6% to 55.5%. The purchase of these plants will be bolstered by the Mexican government through the financial backing of Fonadin and other public financial entities.
However, the IMCO has expressed concerns regarding the cost of allocating public resources to purchase power plants that primarily rely on fossil fuels rather than investing in the country’s energy transition.
Conclusion
The acquisition of 13 Iberdrola plants by the Mexican government has raised questions regarding its impact on the country’s energy sector, the types of plants involved, and whether it constitutes nationalization.
While the sale implies that the CFE will be responsible for the plants’ operation and economic benefits, a private entity will own the assets. Whether or not Iberdrola will leave the country remains uncertain, but the purchase will increase the CFE’s share in the generation of all the country’s energy.
Nevertheless, concerns have been raised about the government’s move to reduce reliance on renewable energy sources and instead promote fossil fuels, which could have negative consequences for the environment and Mexico’s climate goals.
The move has also been criticized for potentially increasing the country’s debt burden, as the purchase of the plants was financed through a loan from the Development Bank of Latin America.
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Patrick Bannett is a profound writer and content producer embarking on his digital journalism journey with Global Web Wire. He is knowledgeable on various daily life topics, including politics, personal finance, travel, lifestyle, and relationships. Apart from writing, Patrick is also an accomplished communicator and networker. He always seeks new opportunities to collaborate with like-minded individuals and businesses. Bannett enjoys hiking, practicing yoga, and exploring new cultures when he is not writing. Bannett holds a Ph.D. in English and Communications and continues expanding his knowledge through ongoing education and research.
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