Tuesday, July 5

Iberdrola’s war with López Obrador increases in degree

Iberdrola’s war with Mexican President Andrés Manuel López Obrador (AMLO) increases in degree. The Spanish company has sued in an international court the Mexican public company Federal Electricity Commission (CFE) for the start-up of the Topolobampo III combined cycle plant, according to the Mexican newspaper Expansión.

Iberdrola sources have not responded to a request for comment from Investment Strategies.

The plant is already built, but it has not yet entered into commercial operation because Iberdrola has not received the documents authorizing its start-up.

The aim of the arbitration – which began in March – is for the plant to start operating immediately. It was scheduled to start operating in December 2020. It is not yet underway because CFE has conditioned its operation on the Spanish company paying a fine of 16 million dollars for construction delays, according to a document issued by the Mexican newspaper.

In your arbitration procedure, Iberdrola requests the rejection of the fine since, in its opinion, the delay in construction was due to force majeure.

In addition, it demands that CFE pay it some 10 million dollars for expenses, damages and losses for the delay in the start-up of the combined cycle power plant, with a capacity of 779 MW to sell electricity to the Mexican public company.

It can generate that power with its two gas turbines and one steam turbine. The construction of the plant was granted in March 2017, when the government of former President Enrique Peña Nieto (2012-2018), of the Institutional Revolutionary Party (PRI), was still in power.

AMLO against Iberdrola

The arrival of AMLO in December 2018 has been a turning point for the Mexican government’s relations with Iberdrola, the largest private producer in the Mesoamerican country.

“Iberdrola became a leading company in the sector”López Obrador said during one of his press conferences in which he directly attacked the Spanish power company, with an installed capacity in Mexico of 1,325 MW of renewable energy.

AMLO has Iberdrola between eyebrows and eyebrows for having turned its US subsidiary Avangrid into a revolving door for ministers and presidents of Mexico. The former president of Mexico, Felipe Calderón (2006-2012) was a member of the Avangrid board, while its former energy minister, Georgina Kessel, was also paid by the subsidiary in the United States.

Other Spanish companies such as Repsol and Acciona are also in López Obrador’s shooting range.

Anti-Iberdrola law suspended by justice

Among other attempts to harm Iberdrola’s operations in Mexico, the president approved in March this year a decree that gave priority to fossil fuels over renewables when distributing energy through the electrical infrastructure.

This measure, however, was declared unconstitutional in November by the Supreme Court of Justice of the Nation, the highest judicial body in Mexico. The decree hinders free competition by preventing clean energy operators from entering the electricity generation market, according to the Supreme Court ruling.

The objective of the decree was to favor CFE, since it generates most of its energy with fossil fuels. In this way, it would be ensured that all the energy generated by CFE would enter the system.

For now, Topolobampo III is only the latest of Iberdrola’s disputes with the López government.

Relations with the government are expected to remain tense until at least 2024, when the next elections take place. The Mexican Constitution does not allow reelection, so the president will not be able to run again.


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