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Mexico cancels electricity generating plants private tender for own projects

Four power plants tendered would have generated 1.5 GW

- Four power plants tendered would have generated 1.5 GW
- CFE recently prioritized construction of eight projects with own resources

By Sheky Espejo and Richard Rubin/ Platts

Petroleumworld 07 20 2020

Mexico is pushing forward with its strategy of curbing participation by private power producers by taking generation projects away from them to strengthen the Federal Electricity Commission, the state utility, industry observers said July 16.

The commission, known as the CFE, on July 14 cancelled tenders for the construction of four power plants with a combined capacity of 1.5 GW: Salamanca, San Luis Potosi, Los Humeros III Phase B, and Baja California Sur VI. More than 70 companies had expressed interest in the tenders, including Abengoa, Acciona, China Energy, GE Global, Mota-Engil, Siemens Gas & Power and Sinohydro, according to CFE.

"The administration is showing again it does not want private participation," said a US-based consultant who asked not to be identified. The move would be in line with what the government has done to other power producers, particularly those who use clean energy technologies, the consultant said.

The tenders were launched in late 2019 when President Andres Manuel Lopez Obrador administration was in a hurry to increase generation capacity. Now, citing the coronavirus pandemic, the government says it is rethinking the strategy, prioritizing generation from CFE plants over private producers.

"Due to conditions of economic nature that have affected the company, derived from the sanitary contingency caused by Covid-19, a reevaluation of the tender processes and the financial strategies is being conducted," CFE said July 15 in a statement.

"They (CFE) wants to build the plants, even if they don´t have the money," an executive from a company that competes with CFE in generation and which has been affected by the recent regulation said July 16. CFE reported a net loss of $5.4 billion in the the first quarter.

Despite the cancellation, CFE has no obligation to compensate the firms that participated in the tender process, it said in a letter sent to tender participants July 14 and seen by Platts.

"CFE will not be responsible for the expenses associated with the preparation of the tender offers of the participants, thus there being no obligation to grant compensation of any kind," it said.

The four cancelled power plants were part of a CFE´s long-term development plan for the construction of 25 plants , according to CEO Manuel Bartlett. In a June 30 letter to energy minister Rocio Nahle, Bartlett said CFE had recently decided to prioritize the construction of eight of the plants, with a total capacity of 4.5 GW. These would be built with CFE funds, not using the previous scheme of "financed public work," Bartlett said in the letter, seen July 16 by S&P Global Platts.

While the Salamanca plant is included among the eight to be built with CFE funds, San Luis Potosi, Los Humeros III and Baja California Sur VI are among the remaining 17 plants, with a total capacity of 7.6 GW, that would be built after 2025. Funding plans for the 17 plants has not been disclosed.

Total Mexican power demand is 40.9 GW, according to Cenace, the state grid operator.

By Sheky Espejo and Richard Rubinfrom S&P Platts
07 17 2020



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