Private Banks Could Pay for the State’s Purchase of Power Plants

Banks BBVA, Santander and Bank of America announced that they could finance the government's desired purchase of Iberdrola's power plants. Moreover, Mexico’s president stressed that the cost of the purchase will be recovered in the next decade.

Bloomberg News reported that these banks are seeking to jointly finance the US$6 billion that Mexico has agreed to purchase Iberdrola’s various plants. Other interested banks include Banorte and Inbursa. The report noted that the private sector and the government are in the early stages of talks.

Iberdrola has already sold a portfolio of 8,534MW and a 103MW wind farm to Mexico Infrastructure Partners (MIP). The transaction was carried out through the National Infrastructure Fund (FONADIN) and other federal financial entities. The move will help CFE enhance its power production capacity in Mexico’s northeast from 7% to 45%. López Obrador said this was another step toward the rescue of CFE. 

President López Obrador assured that the investment used for the purchase of 13 power plants from Iberdrola will be recovered in 10 years. “This investment is profitable. Moreover, with it, we guarantee that there will be no shortage of electricity. The country will continue to generate more electricity."

On March 11, 2023, the private power producer association AME issued a statement in which it acknowledged the Mexican government’s constructive mindset to reach an agreement with the Spanish company. "AME celebrates the agreement announced by the government. Likewise, we hope this represents the beginning of a new stage in which the private sector is welcome to invest in the development of renewable energy in the country, under the supervision of the state government," the statement reads. 

However, the Center for Economic Studies of the Private Sector (CEESP) criticized the government's decision to acquire Iberdrola's Mexican assets, calling it a flawed public policy. CEESP pointed out three negative aspects of the purchase: uncertainty for investors, maintenance expenses and the missed opportunity that nearshoring represents for the country. The purchase also follows previous regulatory challenges that Iberdrola has faced during this administration. The center also highlights that while the acquired plants might be efficient, maintenance costs for the long term could be hard to cover. “In Mexico, as well as in the rest of the world, governments face problems regarding resource sufficiency for infrastructure maintenance, as they compete with other priorities that are often more urgent,” reads CEESP’s press release.