Iberdrola advances decarbonization goals with $6.2bn sale of Mexican energy assets

Iberdrola, a global energy giant, has successfully finalized the sale of a significant portion of its operations in Mexico, marking a pivotal shift in its business strategy within the country. This transaction, valued at approximately $6.2 billion (€5.8 billion), entails the transfer of a 55% stake in Iberdrola’s Mexican business to a new entity, underscoring the company’s ongoing commitment to decarbonization and strategic repositioning in the energy sector.

The deal includes 13 generation plants with an impressive combined installed capacity of 8,539 MW. Notably, the portfolio predominantly consists of gas-fired combined cycle power stations, which account for 99% of the sold assets. These facilities have been instrumental in meeting Mexico’s energy demands, with 87% operating under the Independent Power Producer regime and contracted with the Comisión Federal de Electricidad (CFE), Mexico’s state-owned utility.

The divested assets feature key power generation sites, including Monterrey I and II, Altamira III, IV, and V, Escobedo, La Laguna, Tamazunchale I, Baja California, Topolobampo II and III, and the La Venta III wind farm, alongside several private combined cycle gas plants. This strategic move not only alters Iberdrola’s operational footprint in Mexico but also transitions the stewardship of these critical energy assets, along with 460 dedicated employees, to a trust managed by Mexico Infrastructure Partners (MIP).

This divestiture represents a significant portion, 55%, of Iberdrola’s gross operating profit (EBITDA) in Mexico, signifying a major shift in the company’s focus within the country. However, Iberdrola retains a substantial presence in Mexico, holding onto 15 plants, all of its private customers, and a robust portfolio of renewable energy projects. This strategic retention underscores the company’s continued investment in wind and solar assets, reinforcing its leadership in Mexico’s renewable energy sector.

The completion of this transaction is in line with Iberdrola’s broader strategy of prioritizing decarbonization and aligns with the terms agreed upon last June. The financial backing for the operation includes contributions from the National Infrastructure Fund of Mexico (Fonadin), other public financial entities, and private finance groups, illustrating a wide-ranging support network for this significant energy sector deal.

Iberdrola’s commitment to Mexico’s energy transition remains steadfast, with over 6,000 MW of renewable projects in the pipeline, including more than 2,000 MW expected to be developed over the next five years. This initiative is part of a larger, collaborative effort with the Mexican government to advance renewable energy development, highlighted by a memorandum of understanding between Iberdrola Mexico and MIP announced earlier by Iberdrola’s Executive Chairman Ignacio Galán and Mexico’s President Andrés Manuel López Obrador.

Through these strategic endeavors, Iberdrola aims to solidify its position as a leader in renewable energy, contributing significantly to Mexico’s decarbonization efforts and energy transition. The company’s recent completion of the 105 MW Santiago wind farm in September 2023 exemplifies its ongoing investment and commitment to expanding clean energy sources in Mexico.

This strategic move by Iberdrola not only aligns with global trends towards renewable energy and decarbonization but also reflects a nuanced approach to navigating the complex energy market in Mexico. By divesting a significant portion of its conventional energy assets while simultaneously investing in renewable projects, Iberdrola is effectively balancing operational efficiency with environmental responsibility. This transition supports Mexico’s energy goals and sets a precedent for sustainable development in the sector.