Iberdrola considers Mexico exit amid global energy divestment push: sources

Spanish utility Iberdrola is rumored to be considering selling its remaining power generation assets in Mexico as part of a global strategy to exit non-core markets and refocus on jurisdictions with more stable legal and regulatory frameworks.

The potential move comes as Mexico undergoes a sweeping overhaul of its energy policy and legal framework, following an initial divestment from Iberdrola of part of its Mexico portfolio.

Iberdrola has hired Barclays to explore a sale of the 15 plants in Mexico with a market value of Eur4 billion (roughly $4.7 billion), said Spanish newspaper El Confidencial on July 23, citing people familiar with the operation.

Observers and market participants are watching closely as Mexican President Claudia Sheinbaum's new administration prepares to present the secondary legislation that will stem from a set of sweeping constitutional reforms that reshaped the structure of the energy sector and the legal system.

If confirmed, the sale would mark Iberdrola's total exit from power generation in Mexico after more than two decades in the market.

In recent years, Iberdrola has pivoted decisively away from conventional power generation to focus on electricity grids, renewable energy, and customer solutions. Under its short-term strategic plan, the company allocated 60% of its planned investments to regulated network businesses and 28% to renewables. The remaining capital is directed toward enhancing services and digitalization for industrial and residential clients, rather than expanding baseload generation capacity.

Iberdrola recently closed a capital increase of Eur5 billion, which will finance its investment plan in electricity grids in the US and the UK.

This company is looking to take advantage of "unprecedented" investment opportunities in the network business, which are estimated to be worth Eur55 billion between 2026 and 2031.

The company emphasized that the investments would be made in markets with stable, predictable regulatory frameworks, with attractive returns.

In 2023, following continuous attacks from the Mexican presidency of nepotism and corruption, Iberdrola made a landmark $6.2 billion divestment of a big portion of its portfolio to a state-backed trust.

The assets acquired from Iberdrola helped the Mexican government advertise the operation as an increase in the state utility CFE's ownership of generation assets in the country. The operation was displayed as a major step in the government's efforts to increase the country's energy self-sufficiency.

When asked about the rumored sale of Mexican assets during the company's second-quarter earnings call on July 23, executive chairman José Ignacio Sánchez Galán brushed it off, saying he did not "comment on rumors" and that he had "no idea."

The company did not respond to a request to comment. Barclays declined to comment.

The speculation comes amid Iberdrola's ongoing effort to streamline its global portfolio and invest more heavily in grid infrastructure and renewables in countries with robust institutional frameworks. Under its current Eur41 billion investment plan, 75% of capital is earmarked for Spain, the US, the UK, and Brazil.