Madrid Spain.- Shares of Iberdrola SA rose after it agreed to sell most of its Mexican assets in a deal that ends years of tensions with the government and curbs the Spanish utility’s profits.
The shares were trading at 11.70 euros, 2.45 percent more than the previous closing in the operations of the Continuous Market of the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges.
Under the $6 billion deal announced yesterday, Iberdrola will sell 12 gas plants and a wind farm to a government-linked vehicle, in a move President Andrés López Obrador called a “new nationalization.” Iberdrola will give up around 75 percent of its installed capacity in Mexico – plants linked to contracts with state power company CFE – and will retain power plants that supply power to private industrial clients.
“We believe that this agreement is beneficial for everyone, for Iberdrola and Mexico,” Chief Financial Officer José Sainz said in a call with analysts on Wednesday.
The agreement will reduce Iberdrola’s earnings before interest, taxes, depreciation and amortization by $550 million and cut net profit by $90 million. according to data compiled by Bloomberg, it represents the largest asset divestment in company history and frees the Bilbao, Spain-based utility of some of its dirtiest power plants.
Cash generated from the deal will help finance Iberdrola’s three-year investment plan through 2025, which includes spending €17 billion to expand renewable energy capacity and another €27 billion on grids. The main focus is on the United States and Western Europe.
Spain’s largest power company has gradually scaled back its operations in Mexico, which have been targeted by the president in his bid to remove the influence of foreign energy companies from the power sector. The company has faced increasing difficulties in getting approval for plant permits and contract renewals.
Iberdrola maintains some 2,400 megawatts of capacity in Mexico, with 56 percent in combined cycle and cogeneration and the rest in renewables. That business will contribute an estimated $400 million to the company’s Ebitda in 2023.
