Grupo Mexico to Merge Power Unit With BlackRock-Backed Saavi

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(Bloomberg) — Mexican mining and railroad conglomerate Grupo Mexico has struck a deal to merge its electricity generation operations with a BlackRock Inc. unit, creating the country’s largest private power operator. 

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Grupo Mexico’s infrastructure division has signed a definitive agreement to combine its power generation assets with Saavi Energia, part of BlackRock’s Global Infrastructure Partners portfolio, the conglomerate said Monday in a statement. 

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Financial terms of the deal were not disclosed. The merged companies will now own a combined 4.5 gigawatts of generation from 14 plants with a pipeline to reach 5 gigawatts, making it Mexico’s largest private power generator without any government-controlled stake. Grupo Mexico will control 70% of Saavi, with the remaining 30% staying with Global Infrastructure Partners (GIP).

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One gigawatt is enough to power roughly 1 million homes.

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“Grupo Mexico expects this alliance to lead to a long-term business relationship with GIP, allowing the parties to explore new opportunities for collaboration in the infrastructure sector, both in Mexico and abroad,” the conglomerate said in a statement. 

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President Claudia Sheinbaum has promised to spend $23.4 billion on new electricity infrastructure through 2030 in a bid to prop up the national grid, which has for years been beset by seasonal blackouts. The government has pledged to add 6 gigawatts of electricity generation capacity this year, boosting Mexico’s total generation capacity to around 96 gigawatts

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The merger follows new rules published by the government earlier this month that define how private power plants will be allowed to operate in Mexico. The rules establish how power generators with existing government contracts will be able to sell electricity in the country and set parameters for energy storage and on-site power generation.

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Those rules have generated optimism that companies can now begin negotiating new contracts with the government and give more clarity for future investment plans.

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“The Mexican power generation sector is back in play – and this amidst all the uncertainty over global trade and the USMCA negotiations,” said Roger Horn, senior emerging market credit strategist at Mariva Capital Markets. “The sector has huge investment needs and it’s very affirming to see an industrial firm like German Larrea’s Grupo Mexico taking center stage.”

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State-centric energy laws limit private company ownership to 46% of Mexico’s total power generation capacity, with state utility Comision Federal de Electricidad controlling the rest.

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—With assistance from Kelsey Butler.

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(Updates to include background, analyst quote from the fifth paragraph)

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