CFE Signs Multi-Year Contracts With Coal Mining Companies

The Federal Electricity Commission (CFE) signed 52 contracts with Mexican coal companies to guarantee the supply of the fossil fuel for the period from 2022 to 2024. CFE emphasized that although there were 121 applicants, only companies with a good track record were selected.

CFE reported that the new contracts worth MX$3,845 million (US$189.36 million) are expected to supply 3.18 million tons of coal in the next two years. Miguel López, Deputy Director of Contracting and Services, CFE, said that although the new contracts sought to benefit above all micro and small-sized coal producers. The small-scale companies also had to meet other requirements such as transparency and fair prices.

López explained that the government previously identified 148 potential suppliers in the country. However, only 121 sent their complete requirements. During the selection process, the inspection actions and coal statistics of the companies were reviewed to verify which ones could meet the demand without facing problems. Based on these variables, CFE selected 54 companies, whereas others were disqualified due to past incidents, delivery delays and failure to comply with regulations, among other factors. The government emphasized that the new agreements were elaborated based on the productive capacity of each company and will be valid from July 2022 to December 2024.

For the period from 2020 to 2021, CFE singed 60 contracts with medium and small-sized coal producers in Coahuila, totaling 1.5 million tons of coal worth MX$1.5 billion (US$73.79 million). CFE explained that although some mining companies did not comply with the agreement, most performed excellently. Consequently, it wanted to renew these contracts in 2022.

Faced with criticism that coal is a highly polluting energy source and that Mexico should promote cleaner electricity López said that the utility has been buying coal since the 1980s. In addition, he highlighted that the percentage of electricity produced with coal is only 4 percent, leading to minimal pollution in the country. Pierre Gilly, Manager of Social Development, CFE, said that the new coal scheme has proven to be very beneficial for both producers and the government and that detractors oppose it are because their private interests have been affected by the policy.

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 turning all industries greener and therefore dooming environmentally unfriendly industries like coal. Additionally, some countries have agreed to curb coal-based power production due to environmental concerns. In 2021, G20 countries agreed to end public funding for coal-fired power generation abroad, for example.