ATCO Hands Over Pipeline to CFE

Canadian company ATCO handed over a pipeline located in Hidalgo to CFE. The project was clouded by a dispute with the government and this resolution could be a step forward in the USMCA energy dispute.

When López Obrador entered office, CFE canceled a contract it had with ATCO to build a pipeline in Ramal Tula, Hidalgo. The Canadian company asked for arbitration in 2018 with the London Court of International Arbitration (LCIA). Although the pipeline was nearly finished, ATCO said that the government did not ensure the finalization of the project. In 2021, CFE had to pay around US$100 million in damages and legal fees.

According to Reuters, ATCO agreed to transfer ownership of the pipeline to Mexico after Obrador’s meeting with Canada’s Prime Minister, Justin Trudeau during the North America Leader Summit, when Obrador addressed concerns over energy policy and met with Canadian enterprises.

The transfer will free ATCO of any responsibilities related to the project and it will be up to the Mexican government to finish the construction. The pipeline is set to supply a power station in the North of Mexico City.

Earlier in 2023, it was reported that CFE faces several lawsuits, although the utility did not disclose all the suppliers it has a legal dispute with. The company has five ongoing international lawsuits, nine arbitrations in London and seven lawsuits in Mexico. 

According to Bloomberg, CFE has spent US$880 million on contingencies, 150% more than it accounted for in 2021. CFE reduced its losses to US$2.05 billion in 2022, down from US$5.474 billion in 2021, impacted by higher energy costs, compensation, benefits and debt costs.

This administration set out to “rescue” state-owned companies, PEMEX and CFE. On the back of this policy, mid 2022, the US and Canada started formal conversations to issue private investment’s concerns regarding unfair competition in the Mexican energy market. Moreover, this and other disputes represent a threat to the upcoming renegotiation of the treaty in 2026. What is more, former US president Donald Trump’s intention to run for president could mean more uncertainty for the duration of the free-trade agreement.