Iberdrola: Selling Mexico to Buy Wires in Britain and America

Iberdrola is the clearest example in Spanish business of a company deciding that Anglo-Saxon regulators are a better counterparty than Latin American governments. Twenty years ago its growth story was Mexico and Brazil; today its investment plan allocates nothing to Mexico and 65% of everything to the United Kingdom and the United States. This case study traces the acquisitions that built the Anglosphere platform, the disposals that funded it, and the political exposure that the company has bought in exchange for currency stability. It is part of the Spain Company Stories hub.

Why did Iberdrola start buying in the Anglosphere?

Because ScottishPower was available in 2006 at a moment when Iberdrola needed scale outside Spain and had just fought off a domestic merger, and because British regulated networks offered inflation-linked returns that no Latin American asset could match. The £11.6bn (€17.2bn) purchase, completed in April 2007, doubled the company’s size.

The Spanish context was a takeover battle. Gas Natural had bid for Endesa in 2005; E.ON and then Enel and Acciona followed; Iberdrola, under Ignacio Galán since 2001, was itself a target of speculation. Buying ScottishPower made Iberdrola too large to swallow and gave it a distribution network in Scotland and Merseyside, a renewables portfolio and a UK retail business at once.

Energy East followed in 2008 for $4.5bn plus assumed debt, bringing regulated utilities in New York, Maine and Connecticut. The timing looked poor as the financial crisis arrived; in retrospect it bought regulated US assets at pre-crisis prices in states with supportive renewable policies. The 2015 merger of Iberdrola USA with UIL Holdings created Avangrid, listed in New York with Iberdrola holding 81.5%.

What did Mexico contribute, and why was it sold?

Mexico was for a decade Iberdrola’s most profitable growth market: by 2019 it operated close to 10 GW there, mostly combined-cycle gas plants selling power to the state utility CFE and to private industrial customers, and the country contributed a large share of group EBITDA outside Spain. It was sold because the government of Andrés Manuel López Obrador decided that private generation was a problem to be reversed.

From 2019 the López Obrador administration changed dispatch rules to favour CFE plants, halted new permits, suspended renewable auctions and, in 2021, passed an electricity law prioritising state generation. Iberdrola’s plants were fined, its new projects were blocked and its position as the largest private generator became a liability. Rather than litigate, the company negotiated. In February 2024 it sold 13 plants with 8.6 GW of capacity, 55% of its Mexican business, to a trust led by Mexico Infrastructure Partners and backed by the Mexican state for $6.2bn, a transaction the president presented as a “new nationalisation”.

The remainder — 2.6 GW of gas, cogeneration, wind and solar plants plus Mexico’s largest qualified-supplier retail business — went to Cox for $4.2bn in a deal announced on 1 August 2025 and completed on 24 April 2026. Iberdrola stated plainly that the sale formed part of its strategy to prioritise regulated networks and long-term contracted generation in the United States and the United Kingdom. The exit from a country that had been its emerging-market flagship took just over two years and yielded around $10.4bn.

Why buy out Avangrid’s minorities?

To control capital allocation without a US minority board and a US share price that traded at a discount to the sum of its parts. Iberdrola paid $35.75 per share, about $2.55bn, for the 18.4% it did not own, and delisted Avangrid from the New York Stock Exchange in December 2024.

Avangrid had been a frustrating listed vehicle. Its attempt to buy PNM Resources of New Mexico for $8.3bn, agreed in 2020, was rejected by New Mexico regulators in 2021 and finally abandoned at the end of 2023. Its offshore wind projects off Massachusetts and Connecticut were hit by cost inflation; Commonwealth Wind was cancelled and Park City Wind rebid. The stock underperformed and minority shareholders sued over the buyout price.

With 100% ownership, Iberdrola can direct Avangrid’s eight regulated utilities — NYSEG, RG&E, Central Maine Power, UI, SCG, CNG, Berkshire Gas and Maine Natural Gas — to invest in grid upgrades funded from the parent’s balance sheet, and can take decisions on offshore wind without a separate shareholder base second-guessing them. The US is allocated €16bn of the 2025–2028 plan, almost all of it networks.

What did Electricity North West add?

A third UK distribution network, serving 2.4 million customers in Manchester, Cumbria and Lancashire, bought in 2024 at an enterprise value of around £4.2bn from a consortium led by Japan’s Kansai Electric and Equitix. Iberdrola took 88% with Kansai retaining 12%.

ENW was the last independent distribution network in Britain and the deal made ScottishPower’s parent the second-largest network operator in the country after National Grid. It doubled Iberdrola’s UK regulated asset base in distribution and gave it a contiguous footprint from Scotland down through Merseyside and the North West. The purchase was priced at a premium to regulatory asset value that reflected the scarcity of the asset and the certainty of Ofgem’s inflation-linked return.

The UK is now Iberdrola’s largest investment destination, with €20bn planned to 2028 across ENW, ScottishPower’s transmission build-out for the Scottish renewables corridor, and the East Anglia offshore wind projects. Britain’s Clean Power 2030 target requires tens of billions in grid reinforcement, and Iberdrola’s transmission licence in southern Scotland puts it in the path of most of it.

Why do networks dominate the plan?

Because they pay a regulated return on invested capital with almost no volume, price or currency risk, and because the electrification of transport, heating and data centres in the US and UK requires more grid than either country has built in fifty years. Iberdrola calls it the “wires” strategy, and it is now the whole company.

The 2025–2028 plan, presented on 24 September 2025, allocates €37bn to networks — €25bn distribution and €12bn transmission, 95% of the transmission in the UK and US — and €21bn to generation, mostly offshore and onshore wind and storage with long-term contracts. The regulated asset base is targeted at €70bn by 2028, up €40bn since 2020, earning an average return on equity of about 9.5%. Adjusted net profit is guided to €7.6bn by 2028, with dividends close to €20bn over the period. Our study of Iberdrola’s wires-over-windmills strategy examines that shift in detail.

The comparison with Latin America is stark. A Mexican combined-cycle plant sold power under contracts that a president could reinterpret; a Brazilian network is regulated but in reais; a British network earns a return set by Ofgem in sterling, indexed to inflation, for five years at a time. Iberdrola keeps Brazil, where Neoenergia has €7bn allocated, because Brazilian network regulation is stable and the market is large, but the Spanish-speaking American exposure has been reduced to almost nothing.

What are the political risks in each market?

In the United States, state-level regulators and federal energy policy; in the United Kingdom, Ofgem’s price controls and the politics of energy bills; in Spain, a regulator that has cut network returns and a windfall tax on energy companies; in Brazil, currency and the concession renewal cycle. None is trivial, and Iberdrola has chosen to hold four of them rather than one Mexican one.

The US risk became concrete in 2025. The federal administration’s hostility to offshore wind, including stop-work orders on projects in other developers’ hands and the withdrawal of tax credits under the July 2025 budget law, hit the generation side of Avangrid’s plan. Iberdrola responded by shifting US capital further toward regulated networks, where state commissions rather than Washington decide returns, and by prioritising New York and Maine, whose regulators have approved multi-year rate plans funding grid investment.

In Britain the risk is the cost of the transition. Network charges are a growing share of household bills, and the government that set the Clean Power 2030 target faces pressure to hold prices down. Ofgem’s RIIO-3 decisions for transmission, published in 2025, allowed higher investment than RIIO-2 but at returns Iberdrola considers tight. In Spain, the CNMC’s proposed network return for 2026–2031 was contested by every distributor, Iberdrola loudest among them, and the April 2025 blackout — analysed in our account of what running a 78% renewable grid requires — has made grid investment a political priority without yet raising its remuneration.

Was leaving Latin America the right call?

On the evidence so far, yes: Iberdrola sold Mexico at an aggregate valuation above what the assets were earning under a hostile regime, redeployed into markets where its share price is rewarded for regulated growth, and has outperformed European utility peers since. The cost is a portfolio with lower growth potential and a heavier dependence on regulatory goodwill in two countries.

The counterfactual is Mexico under Claudia Sheinbaum, who has softened her predecessor’s stance and reopened some private generation. A company that had held on might now be expanding again. But Iberdrola’s $10.4bn exit was struck at prices that reflected the assets’ contracted cash flows rather than the political discount, and it was closed before US tariffs on Mexico added a new layer of uncertainty. The company took the money.

The broader Spanish pattern, described in our review of thirty years of Spanish investment in Latin America, is the same: proceeds from Latin American exits are being redeployed north, and companies as different as ACS, which now earns 63% of its revenue in America, Ferrovial and Santander have made the same geographic choice. Iberdrola’s version is the purest because it did not simply add the Anglosphere; it removed Mexico entirely. The contrast with Telefónica, which left the region with €2.3bn of write-downs, or with Repsol’s expropriation losses in Argentina examined in our YPF case study, is that Iberdrola sold while the assets still commanded a price.

What does Iberdrola look like in 2028?

A regulated network company with a renewables arm, roughly two thirds British and American by investment, earning around €7.6bn a year and paying most of it out. The Spanish business remains the largest single contributor to profit but the smallest recipient of new capital relative to its size.

The regulated asset base of €70bn would make Iberdrola the largest privately owned electricity network operator in the Western world. Distribution RAB of €50bn and transmission RAB of €20bn, earning around 9.5% on equity, produce a profit stream almost immune to commodity prices. Offshore wind — East Anglia in Britain, Vineyard Wind and successors in the US, Baltic Eagle and Windanker in Germany — is the growth option, but it is now a minority of capital rather than the core.

The open question is whether two Anglo-Saxon regulators can be relied upon for a decade of returns at the level a €58bn plan requires. Iberdrola’s answer has been to make itself indispensable to both: the company building the grid that Clean Power 2030 and US electrification need is harder to squeeze than a foreign generator selling gas power into a state monopoly. That, in the end, is the whole difference between the Iberdrola of Mexico and the Iberdrola of Manchester.

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