Mexican president plans renegotiation of power industry contracts

RIO DE JANEIRO, BRAZIL – Mexico plans to renegotiate contracts in the electricity sector with Spain’s Iberdrola and around 10 other firms, President Andrés Manuel López Obrador said on Wednesday, March 3rd, heralding fresh tensions between his government and the private sector.

“Basically it’s Iberdrola and about 10 more,” López Obrador told a regular government news conference. “We’re going to look for agreements in the sense that we want to keep having contracts, but we need to get up to date with the new reality.”

Lopez Obrador was speaking a day after Mexico’s Congress completed the process of approving a new law he championed that strengthens the rights of state electricity firm the Comision Federal de Electricidad (CFE) over private operators.

The Mexican peso took a dip on Wednesday following the Senate’s approval of the legislation.

The new legislation opens the door to renegotiating and potentially terminating contracts with independent producers, and could encourage a raft of lawsuits from companies.

It also aims to prioritize the CFE in energy dispatch and eliminate its obligation to buy electricity through auctions.

Lopez Obrador is attempting to roll back a reform passed under the previous government that opened up the energy market to private capital, arguing it put the state at a disadvantage.