CFE to Open Tender for Coal Mining Companies
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CFE to Open Tender for Coal Mining Companies

Photo by:   Nikolay Kovalenko
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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Tue, 02/15/2022 - 12:41

The Federal Electricity Commission (CFE) announced it will soon launch the 2022 coal tender, aiming to obtain multi-year contracts. In addition, CFE defended the government's position to buy coal, since it represents a small percentage of all the energy produced in the country and has proven to be a win-win scheme.

CFE reported that in the coming weeks details of the next coal tender will be announced,seeking to ensure fuel supply to produce 4 percent of the country's electricity. CFE explained that although some mining companies did not comply with the agreements in 2020-2021, most did very well. As a result, a new tender will be launched in 2022.

For the 2020-2021 period, CFE acquired 60 contracts from medium and small coal producers in Coahuila, totaling 1.5 million tons of coal for MX$1,500 million (US$73.36 million). CFE said that the success of these contracts was due to their adherence to President López Obrador´s five principles which ensure the reliability of companies.

“In 2020 many contracts were signed, which in addition to being successful in terms of costs, were carried out in strict adherence to the president´s principles. These are: zero corruption, zero smuggling, a preference for small producers, that producers are honest and sell charcoal and not soil, and, finally, fair prices,” said Miguel Alejandro López, Deputy Director of Contracting and Services at CFE.

López explained that in order to comply with these principles, CFE carried out inspections of all contracted companies, and found out that Mining Confusion, Minería y Carbón de Carbón and Drumakm did not comply with the required operating permits, therefore, their contracts were cancelled. In addition, he said that the inspections also detected irregularities with 13 other companies. However, these were not serious enough to cancel their contracts. CFE highlighted that since 92 percent of all contracts were successful, it would repeat the tender this year. However, to avoid these situations, inspections are planned to occur earlier.

In addition, López defended the government's decision to buy coal to generate electricity as it is a practice that has been done since the 1980s, in addition to the fact that the percentage of electricity produced with coal is very small. Pierre Gilly, Manager of Social Development of the CFE, said that the new coal scheme has proven to be very beneficial for both producers and the government and that those who are against it are because their private interests have been affected.

Although López Obrador’s government has pushed to strengthen coal production, experts agree that the "end of coal is in sight." According to a Fitch Solutions mining report, the decarbonization megatrend is making all industries greener and dooming environmentally unfriendly industries like coal.  

Additionally, some countries have agreed to curb coal generation due to environmental concerns. In 2021, G20 countries agreed to end public funding for coal-fired power generation abroad, but did not set a target for coal phase-out at the national level. Although the agreement is not yet universal, experts agree that coal production will be less promoted and used. As a result,

Photo by:   Nikolay Kovalenko

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