Banco Bilbao Vizcaya Argentaria, Banco Santander SA and Bank of America Corp. are lining up to finance Mexico’s deal to purchase power plants from Spain’s Iberdrola for $6 billion, according to people familiar with the talks.
(Bloomberg) — Banco Bilbao Vizcaya Argentaria, Banco Santander SA and Bank of America Corp. are lining up to finance Mexico’s deal to purchase power plants from Spain’s Iberdrola for $6 billion, according to people familiar with the talks.
The three lenders are among a group that has expressed interest in financing the deal, the people said, who asked not to be named as they are not authorized to discuss a private matter. The discussions are in an early stage, the people said, and the deal is also luring interest from local banks including Grupo Financiero Banorte and billionaire Carlos Slim’s Grupo Financiero Inbursa. Mexican development banks including Banobras are also going to help fund the deal, the people added.
BBVA is looking to provide as much as $2 billion, the people said. The arrangement is not yet final and could still fall apart, one of the people said.
When asked for comment, a Finance Ministry official said that the proposals have not been finalized but the banks are considering financing the plan, including Banobras and other Mexican development banks. Bank of America declined to comment. BBVA, Santander, Banorte and Inbursa didn’t immediately reply to a request for comment.
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The acquisition, announced last week, advances President Andres Manuel Lopez Obrador’s goal of bringing the energy sector under government control. The deal would give the state control over roughly 55% of power generation capacity in the country, bypassing legal hurdles faced by the president’s electricity reform plans that were derailed by lawmakers.
Read More: Mexico’s $6 Billion Power-Plant Buy Is a Bargain, AMLO Says
Moreover, the purchase enables AMLO, as the president is known, to claim victory over Iberdrola, which has been the poster-boy for his campaign against alleged corruption from foreign interests. The president billed the deal as a “nationalization,” but it was a market solution to the political paralysis that had hung over Mexico’s power sector as the government blocked permits for new private plants.
In the wake of the deal, the government is expected to move more quickly to allow other private renewable energy projects to move forward, the people said. That may help resolve a dispute with the US and Canada, which say Mexico’s nationalist energy policies violate their free-trade agreement with the country.
Read More: Businesses Urge Biden to Use ‘Every Tool’ in Mexico Energy Spat
Lopez Obrador said that the plants, some of which are decades old while others are new, cost 30% less than if Mexico had built them from the ground up. He said that upgrading older plants will be quicker than building new ones, which could take 10 years.
–With assistance from Maya Averbuch and Max de Haldevang.
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