The year was 2001 and Ignacio Sánchez Galán became CEO of Iberdrola after resigning as chief executive of Airtel. The electricity company was the ugly duckling of a sector led by Endesa and Unión Fenosa, awarded on the stock market for their bets in the telecommunications sector. The man from Salamanca, for his part, did not take long to identify the United States as the market in which he could grow in a stable and profitable way, taking advantage of the pull of renewable energy. Just six years later, the firm managed to accumulate more than three operational wind gigawatts before taking its first major coup in the country. In 2007, it acquired Energy East, a utilities of electricity and gas distribution in New York and New England. In parallel, rivals such as EDP were forced to accelerate and buy those same 3.8 gigawatts from Horizon Wind Energy, in conflict with Endesa and at the wheel of Iberdrola.
He did not stop his ambition there. The second big knock came in 2015, with the purchase of UIL Holdings, a Connecticut electricity and gas company that allowed it to merge all its assets under the Avangrid brand, its US subsidiary. It has not been a minor effort. The company already has more than $12 billion in capital on the New York Stock Exchange (NYSE). Along the way, it has had to navigate a complex regulatory environment, with substantial milestones such as the New York and Maine rate reviews. Also with the green light for transportation lines such as those in New York – within the framework of the Climate Leadership and Community Protection Act (CLCPA) – or the New England Clean Energy Connect (NECEC), which extends from Quebec to New England.
The success story, however, has faced in recent weeks and faces in the coming months a true crossroads. Pablo Iglesias, then leader of Podemos, said in 2017 that electricity companies are “in the hands of large private companies that act as an oligopoly that prevents real competition.” Conclusion? It is necessary to nationalize them. Iberdrola has just suffered this approach, taken to its limits, not in old Europe, but in the cradle of capitalism. Three weeks ago, the state of Maine called to the polls to vote on the creation of an electric company of a public nature, which implied the de facto nationalization of the two companies that supply practically all of the energy in the area. One of them, Central Maine Power (CMP), is owned by Avangrid.
It is not surprising that the firm chaired by Ignacio Sánchez Galán breathed a sigh of relief when the rejection of 70% of voters to the creation of the public company in question, launched with the name Pine Tree Power and designed to eat up CMP and Versant, was announced. , the other affected firm, with Canadian capital. The estimated cost for the taxpayer, however, reached 13.5 billion. A bill that may have helped Maine voters refuse to trust CMP management to government alternatives pushed by political representatives for the second time in 50 years. The debate is long-term and territorial in scope, to the point that activist groups in favor of nationalizing electricity have flourished in various parts of the country. For example, in San Francisco, the Democratic Socialists of America organization has also demanded that Pacific Gas & Electric go into the public domain and even politicians like Bernie Sanders included the proposal in his presidential program. It is no coincidence that CMP and Versant have spent more than $18 million lobbying against the initiative launched in Maine.
The final challenge
The definitive step for Iberdrola, however, is the purchase of PNM, the electricity company of New Mexico and Texas, a project stuck in the courts and that faces, for better or worse, its final stretch with its sights set on the first quarter 2024. In October 2020, Avangrid announced the purchase of PNM Resources for 8.3 billion dollars. A giant was created with enclaves in six states and renewable assets in 24 and whose combination generated a market value of 21 billion dollars. Despite receiving the first authorizations, the cold water came in December 2021, when the regulator of the state of New Mexico (New Mexico Public Regulation Commission) vetoed the operation due to “its concerns about Avangrid’s service history in its electricity company.” of Maine and for the criminal investigation in Spain of the first executive of Iberdrola, Ignacio Galán.” Since then, an avalanche of resources and the judicialization of the process, a journey that should end in March 2024 at the latest. It is then when the Supreme Court of New Mexico must decide whether to reject the operation or return it to a renewed Public Commission of Regulation. The company, which despite the setbacks and delay has insisted on continuing with the transaction, can argue that the obstacles that once hindered the movement no longer exist.
If this process is completed, only one element can worry Iberdrola’s position. However, it is a factor with enormous disruptive potential and has to do with another visit to the polls, in this case to elect the country’s president in November 2024. The Inflation Reduction Act (IRA) launched by Joe Biden has been trying to attract industrial investment for just over a year, through juicy tax incentives. He has not only put the EU between a rock and a hard place, rightly fearful that companies will flee to American El Dorado, but he has has been successful in its appeal to companies involved in specific sectors, such as renewable energies. The program can blow up, however, if, as the Financial Times, Donald Trump is elected in the next elections. His advisors, in fact, have already made it clear that he will kill the project, introduce greater investments in fossil fuels and reverse the commitment to electric vehicles. Galán rolls the dice in the US and, for now, wins. With the Trump cloud on the horizon.
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