Iberdrola CEO Sees Mexico Facing Lawsuits Over Electricity Law

The chief of Spain’s biggest power company expects Mexico to face a flurry of lawsuits over its controversial new electricity law, which prioritizes the state-owned utility above privately-owned renewable projects.

If Iberdrola SA’s lawyers see “that the law affects our existing business, I’m sure we’ll try to defend the interest of our shareholders as we do in all countries,” Chief Executive Officer Jose Ignacio Sanchez Galan said in an interview. “I imagine everybody is going to do something similar.”

Iberdrola, which has spent almost $12 billion on power projects in Mexico, last year became the first major renewable-energy developer to halt new investments in the nation. The company’s relationship with Mexican President Andres Manuel Lopez Obrador soured in recent years as it became the main target of his push to remove the influence of foreign energy firms. The populist leader has launched bitter verbal attacks against the Spanish energy giant, accusing it of mounting a media campaign against him and engaging in unspecified acts of corruption.

Renewable Giant Iberdrola Halts New Investments in Mexico

AMLO, as the president is best known, came into power in late 2018 and promised to restore the country’s state-owned energy companies Comision Federal de Electricidad and Petroleos Mexicanos to their former glory. He pledged to roll back his predecessor’s liberalizing reforms, which he’s blamed for ransacking and pillaging the country’s vast natural resources.

The new electricity bill, which was approved by congress last week, has come under fire from the business community and environmentalists because CFE’s hydroelectric plants and other government facilities are given priority on the grid ahead of private solar and wind farms. It also removes CFE’s obligation to buy electricity through competitive auctions and calls on Mexico’s energy regulator to revoke self-supply permits that don’t meet certain conditions.

Galan said he respects that governments set policy as they see fit, but added that the law will potentially raise electricity costs for the industry, hurt the environment and negatively impact future investment in Mexico.

“I’m sure that everybody is going to go to court to defend against these damages,” he said.

A spokesmen for AMLO didn’t immediately respond to calls and emails seeking comment.

Galan confirmed that the government has asked Iberdrola to change its contract terms for the dispatch of electricity as part of AMLO’s sector overhaul following the passage of the electricity bill. Last week, the president said that contracts with Iberdrola and 10 other companies cost the CFE more than 300 billion pesos ($14.4 billion) and would be renegotiated.

“We want to continue maintaining contracts, but we have to update them to the new reality,” AMLO said at a press briefing.

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