CFE does not increase its electricity generation capacity nor will there be nationalization

The sale of Iberdrola’s assets does not mean a “nationalization” nor does it increase the electrical capacity of the Federal Electricity Commission (CFE) as President Andrés Manuel López Obrador presumed, since it simply changes the ownership between private parties, clarified the Mexican Institute for the competitiveness (IMCO).

The announcement that the Federal electricity commission will operate the 13 plants sold to Mexico Infrastructure Partners (MIP), which is a Mexican fund manager focused on investments in infrastructure and energy, could put the profitability of the parastatal at risk, by integrating new workers as part of its collective contract, alerted the private body.

By operating the plants, CFE “opens the door for the state company to expand the conditions of its collective bargaining agreement to the workers of the new plants, and puts their profitability in the medium and long term at risk, given the conditions established from the 2020 renegotiation that reduced the retirement age by 10 years ”, exposed the IMCO.

This Wednesday morning, President AMLO said that the CFE will generate 65% of the country’s electricity at the end of his six-year term (in 2024).

However, the IMCO analysts maintained that despite having public financing, legally “the ownership of the plants and the management of the trust will be private, outside the Federal Government and the Federal Electricity Commission (CFE). In other words, the CFE is not increasing its market share in electricity generation”.

He added, the Federal government argues that the percentage of electricity generation under CFE control will increase from 39.6% to 55.5%. However, most of this generation is already under the control of CFE, given that the Independent Power Producers (PIEs) are already part of the company’s generation matrix through the subsidiary CFE Generación V, in charge of managing the contracts with these power plants, to represent them in the market and to report their income statement to the Public Account.

These plants, clarified the IMCO, operate legally under the terms imposed by the company and are a legal, accounting and economic part of the CFE.

“This sale does not represent a nationalization of the industry, nor does it change the operation of the Wholesale Electricity Market, it only changes the ownership of a basket of plants between private parties,” he asserted.

So far, he said, the amount of resources with which Fonadin and the rest of the public entities will participate as part of the asset purchase is unknown, however, even if these do not impact the public debt or that of the CFE, the cost will come from public resources.

Despite the fact that at this time the amount of public financing has not been broken down, it is necessary to question the advisability of allocating resources, by definition scarce, to acquire power plants mostly anchored in fossil fuels at the expense of investments that accelerate the energy transition in the country.

This April 4 (yesterday), the energy company Iberdrola announced to the National Stock Market Commission of Spain the sale of 13 power generation plants in Mexico for a total of 6,000 million dollars to a private trust with majority participation of National Infrastructure Fund (Fonadin) and other Mexican public institutions, managed by Mexico Infrastructure Partners (MIP).

But, “having financing from the public sector does not change the fact that legally the ownership of the plants will remain private,” he said.