Iberdrola Scraps $1.2 Billion Mexico Power Plant: Officials

Spain’s Iberdrola SA is canceling a project in Mexico to build a $1.2 billion combined-cycle plant because it can’t secure a supply of natural gas, according to Mexican officials.

The mayor of Tuxpan, Juan Antonio Aguilar, said in an interview that representatives of Iberdrola told him that it’s scrapping the project in his city because in nine months it hasn’t been able to reach a supply agreement with the state utility, known as CFE.

Hours later on Wednesday, Cuitlahuac Garcia, the governor of Veracruz, tweeted that the Energy Ministry told him the project will be left in the hands of the CFE. Tuxpan is located in Veracruz state.

This would be the first major investment cancellation in the electricity sector since the administration of President Andres Manuel Lopez Obrador announced new measures to limit private renewable energy production and prioritize the state utility. It wasn’t clear whether the lack of a deal with the utility had to do with the government’s position on private generation, or if it was related to Lopez Obrador’s recent public criticism of the company.

Read More: AMLO Says Iberdrola Is a Monopoly in Mexico’s Power Sector

Iberdrola declined to comment on the matter and the public utility, known as CFE, as well as the Energy Ministry, didn’t immediately respond to a request for comment.

“The company received orders from corporate headquarters in Spain to leave,” Aguilar said by phone from Tuxpan. “They had everything ready and were just waiting on the gas contract to get started.”

Iberdrola could restart the project if it strikes a deal over natural gas supply with the public utility, or with Transcanada Corp., in the next 15 days, Aguilar said. The company has already spent $40 million on permits and other expenses for the plant.

Lopez Obrador has been criticized by foreign diplomats and influential business groups for limiting private renewable projects. They say it puts billions of dollars in investment in Mexico at risk.

In a June 12 press conference, Lopez Obrador said that Iberdrola is a monopoly in the power sector. He did not provide a breakdown, but CFE says it produces 54% of the nation’s power.

The Tuxpan plant was part of a larger $5 billion Iberdrola investment that includes other co-generation plants and a solar park, according to the mayor. The Tuxpan project was due to start construction next month and would have created about 2,000 jobs, he said. Reforma newspaper reported on the matter earlier.

Garcia, the governor of Veracruz, said that the CFE would auction the construction of the plant, opening the door to local investors.

©2020 Bloomberg L.P.

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