Iberdrola to Sell Most of Its Mexican Assets for $6 Billion; We've Seen Worse Nationalizations

We don't expect to materially change our EUR 10.60 fair value estimate after no-moat Iberdrola announced it reached an agreement to sell most of its Mexican combined cycle gas turbines, or CCGTs, to Mexico Infrastructure Partners, an infrastructure fund backed by the Mexican government, for $6 billion, in line with our valuation. Further, we are not unhappy to see the company slashing its exposure to a country where it was facing growing hostility from the government. The deal is expected to be closed by year-end pending final agreements and regulatory approvals. Shares are in 3-star territory.