President Andrés Manuel López Obrador tightened his grip on Mexico’s power industry Thursday after getting a green light to buy a majority stake in Iberdrola SA’s energy assets.
The deal achieves a key goal for the 70-year-old president who has sought to strengthen Mexico’s state energy producers and roll back pro-business reforms in the power generation sector passed by the prior administration. The deal had generated concern from international companies about the president’s statist interventions in the economy.
The country’s antitrust regulator on Thursday approved the Iberdrola purchases as long as the energy assets are operated independently. The regulator set conditions, including capping the government’s stake at 51% and requiring an independent administrator be in charge of operations.
The $6 billion deal, which will allow Spain’s energy giant to sell its stake in 12 natural gas-fired power plants and a wind farm, would give Mexico’s state utility Comision Federal de Electricidad, or CFE, more than 55% of the national electricity market. The government stake will be limited to 51% as part of an earlier agreement; the remainder will go to private investors.
Mexico’s Finance Ministry said the decision allows the government to become a leader in Mexico’s power generation sector and would not affect competition. “This transaction does not imply increasing the budgetary public debt beyond the acquisition cost of 51% and does not put pressure on public finances,” it said.
AMLO, as the president known, has said the deal would be 30% cheaper than building the electricity generation capacity from the ground up, although some analysts have said the plants are aging and funds would be better spent on renewable projects to help achieve the nation’s climate pledges.
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