Comision Federal de Electricidad issued the following announcement on March 21.
CFE pays up to eight times more than what was contracted and does not give property rights to the pipelines
Fair agreement is sought with private companies to avoid losses for the CFE
During the morning media conference, President Andrés Manuel López Obrador reaffirmed that the contracts that the Federal Electricity Commission (CFE) made with private companies based on the Energy Reform for the construction of gas pipelines for the transport of natural gas to the different power generation plants, they are leonine and disastrous.
First, because you pay up to eight times more than what was hired; second, because the CFE does not have the right to own the pipelines, and third, the contracts contain clauses -for a fortuitous event or force majeure- that force the CFE to pay private companies fines.
For this reason, President López Obrador indicated that a fair and balanced agreement for the CFE and private companies will be reviewed and that they will not be harmed. As additional, the Board of Directors of the company did not approve the contracts at the time.
" Legally we do not want to cancel the contracts, I can only say that they have a failure of origin, these contracts were not approved by the boards of directors, they were not approved by the Board of Directors of the Federal Electricity Commission," he said.
In addition, the contractual and institutional conditions acquired by the CFE with private companies for the construction of pipelines present a rate of return on investment (equivalent to the private rate of return of gas pipelines) of 16.9%, being that the regulated rate in Mexico for the national system of pipelines of the National Center for Natural Gas Control (CENAGAS) is 10.6%, and in the United States and Canada for 12% (Authorized Return on Equity for Canadian and Us Gas and Electric Utilities).
In addition to the companies IEnova, Carso, TransCanada and Fermaca concentrate more than 90 percent of the contracts, and the construction of some pipelines under their charge is stopped by fortuitous or force majeure.
In this way, the CFE and the Federal Government undertake to review each of the leonine contracts of tendered pipelines with private companies, whose clauses translate into permanent financial losses to the assets of the company.
Original source can be found here.