Buying Iberdrola plants threatens CFE profitability: IMCO

The purchase of 13 Iberdrola power plants by the Mexican government does not represent a nationalization of the industry and does not change the operation of the wholesale electricity market, but only changes the ownership of the basket of power plants between individuals, according to an analysis by the Mexican Competitiveness Institute (IMCO).

On the other hand, the private institution believes that the operation opens the door for the Federal Electricity Commission (CFE) to extend the terms of its collective bargaining agreement to new plant workers, and jeopardizes profitability in the medium and long termtaking into account the conditions established after the 2020 revision, under which the retirement age was reduced by 10 years.

On Tuesday, it announced the purchase of 13 power plants in Mexico for a total of $6 billion from a private trust majority-owned by the National Infrastructure Fund (Fonadin) and other Mexican government agencies operated by Mexico Infrastructure Partners (MIP). Mexican fund manager specializing in infrastructure and energy investments.

IMCO confirms that funding from the public sector this does not change the fact that, legally, ownership of the factories will remain private.

It is important for IMCO to emphasize that, despite state funding, legal ownership of the power plants and management of the trust will be private, outside the federal government and the Federal Electricity Commission (CFE).
According to this analysis, “CFE does not increase its share in the electricity generation market”.

Of all the assets in the deal, there are 12 combined cycle power plants (natural gas and steam) with a capacity of 8,436 MW and one wind with a capacity of 103 MW.

Likewise, 10 power plants operate under the name of Independent Power Producers, which are privately owned power plants that sell all of their CFE products under contracts of up to 30 years prior to the opening of the power sector in 2013/14. In addition, three stations do so privately (that is, participate directly in the Wholesale Electricity Market).

In the opinion of IMCO, this decision was taken within the framework in which Iberdrola aims to reduce its carbon footprint and invest in renewable energy

In November 2022, the company announced its intention to invest 47 billion euros ($51 billion) in renewable generation and grid infrastructure projects over three years. In this sense, the sale frees up capital invested in old fossil fuel projects into new clean energy projects.

IMCO puts under a magnifying glass the statement that participation in the CFE electricity market will increase from 39.6% to 55.5%.

… it must be emphasized that much of this generation is already under the control of the CFE, given that PIEs are already part of the company’s generation matrix through CFE’s subsidiary Generación V, responsible for managing contracts with these plants in order to represent them on the market and report their earnings in public account. In other words, these factories operate legally in accordance with the conditions set by the company and constitute the legal, accounting and economic part of the CFE Treaty.

official position

He President Andrés Manuel López Obrador assured on Wednesday that the purchase of 13 power plants owned by iberdrola makes sure it doesn’t increase light price.

“Basically, it is guaranteed that the price of electricity will not rise. (…) we carried out this operation, this purchase, to strengthen the public company Federal Electricity Commission (CFE) and thus be able to offer electricity at fair prices,” he said at his press conference.

Lopez Obrador announced last Tuesday the purchase of about $6 billion from 13 factories Iberdrola electricity generation, which he repeatedly criticized and said it represented a “new nationalization” as they would become part of the “public heritage”.

Hours before the announcement by the Mexican government in Spain, it was reported that Iberdrola had reached an agreement to sell a total of 8,534 megawatts (MW) in Mexico, the country’s largest fund manager Mexico Infrastructure Partners (MIP) with state participation.

Source: Aristegui Noticias

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