CFE Faces Slew of Lawsuits
Home > Energy > News Article

CFE Faces Slew of Lawsuits

Photo by:   jilapong
Share it!
Perla Velasco By Perla Velasco | Journalist and Industry Analyst - Mon, 03/13/2023 - 12:23

State utility CFE has been the target of several ongoing lawsuits. The company did not disclose all of the suppliers it has a legal dispute with. The company has five international ongoing lawsuits, nine arbitrations in London and seven lawsuits in Mexico. 

“As of the financial statement date, we cannot reasonably determine whether an adverse outcome in these procedures would have a negative effect that would increase the additional provision for litigation,” reported the company.

CFE did report on its dispute with Goldman Sachs’ subsidiary J. Aron & Company. The issue stems from payment and delivery obligations under long-term natural gas purchase contracts following the winter storm Uri in Texas in February 2021 that resulted in unprecedented price spikes. “The company is involved in several significant lawsuits and claims arising from the normal course of its operations, the outcomes of which are considered plausible and will result in cash outflows. Therefore, some provisions have been recognized in the financial statements, representing the best estimate of the payments,” reads the report.

According to Bloomberg Linea, the company 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.

As part of López Obrador’s energy strategy, the administration has set out to rescue PEMEX and CFE. Nonetheless, according to experts, this is a risky strategy since both companies have serious liquidity problems and large amounts of debt. Additionally, the reversing of the energy reform to allow less private participation has fueled discontent in the energy industry. Some of the biggest concerns for investors are government attempts to hamper regulation and permitting processes. The policy changes include the cancellation of auctions for the sale and purchase of electricity and power, the criteria in the emission and accreditation mechanism for Clean Energy Certificates (CELs), reforms to the Electricity Industry Law (LIE) as well as the slowdown of activities of regulator CRE, grid operator CENACE and the Ministry of Energy (SENER).

Photo by:   jilapong

You May Like

Most popular