(Bloomberg) — Mexico’s $6 billion purchase of electricity plants from Spain’s biggest power company is 30% cheaper than building from the ground up, according to President Andres Manuel Lopez Obrador.
“In terms of of the market, what was achieved is a 30% decrease in the price compared to if we had built the plants, even considering their age,” AMLO, as the president is known, said during his morning press conference on Tuesday. “If we had proposed to build these 13 plants, it would take us 10 years, and the term would end with the Comision Federal de Electricidad remaining a minority company”.
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The Iberdrola SA assets, the oldest of which started operating in 1998, have a longer useful life than CFE’s because they are in general newer than the state utility’s facilities, the president said.
Read More: Mexico’s $6 Billion Energy Deal Leaves Foreign Firms Wary
Some analysts are skeptical of AMLO’s claims regarding the deal, noting that the plants are aging and the funds would have been better spent on renewable projects to help achieve the nation’s climate pledges.
About two-thirds of the generation capacity being acquired is two decades old, according to James Ellis, head of Latin America research for BloombergNEF.
“From a cost, climate and emissions point of view, aggressive development of renewables projects by the CFE would be a better use of the funds as opposed to acquiring aging plants,” Ellis said. “Development of even a very large amount of wind and solar capacity would take far less than 10 years.”
The deal announced last week gives CFE more than 55% of the Mexican electricity market, advancing AMLO’s goal of bringing the energy sector under state control. It also enables him to claim victory over Iberdrola, which he’s long accused of corruption. The Spanish firm had faced difficulty getting permits and contract renewals, and faced supply issues with CFE.
(Adds analyst’s comments starting in fourth paragraph.)
