Mexico announces a “nationalization” of electricity after an agreement with Iberdrola

Mexican President Lopez Obrador announced the purchase of 13 power plants from Iberdrola for $6 billion, marking a "new nationalization" of the electricity sector. This reform worries foreign partners and threatens private foreign investment and the development of renewable energy.

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Mexican President Andres Manuel Lopez Obrador welcomed Tuesday a “new nationalization” of the electricity sector by announcing the purchase of 13 power plants from Spanish energy giant Iberdrola for six billion dollars (5.5 billion euros).

This is a “historic day,” insisted the left-wing nationalist president in a video on Twitter, who initiated an energy sector reform to limit foreign participation that has worried his foreign partners. “The Mexican government signed today an agreement to buy from Iberdrola 13 power plants that will be part of the public patrimony and will be operated by the CFE (Federal Electricity Commission, public). This is a new nationalization,” he announced.

The sum of six billion dollars was put forward by the Secretary of Finance, Rogelio Ramírez, during a meeting between López Obrador and the presiding executive of Iberdrola, Ignacio Sánchez Galán, in Mexico City. In this way, the CFE will increase its share in the total electricity production of the country of 126 million people from 39% to 55%, the minister said.

Just a year ago, the Supreme Court validated the reform of the energy sector approved by Parliament to strengthen the share of public companies. This reform threatens billions of foreign private investments and the development of renewables, according to the United States, which does not exclude measures within the framework of the North American Free Trade Treaty.

Another major partner of Mexico, Spain, is in the sights of President Lopez Obrador, who has called for a “break” in the relationship with Madrid. López Obrador has been very critical of Iberdrola, one of the flagships of the Spanish economy. “Mexico is not a land of conquest,” he said at the end of May when the energy regulator had imposed a fine of 447 million dollars on Iberdrola, a sanction finally suspended by the courts.

Iberdrola was accused of selling electricity illegally. “We thank Iberdrola, its general manager” for their “willingness to reach an agreement,” he said Wednesday. “We have had some differences, but dialogue and goodwill are stronger than anything.

From these differences is born this (the agreement) which is something extraordinary, historic”, added Lopez Obrador.

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