September 11, 2019 / 1:00 PM / a month ago

Mexico gets deal with final holdout firm in pipeline contract dispute

FILE PHOTO: Mexico's President Andres Manuel Lopez Obrador attends a news conference at the National Palace in Mexico City, Mexico August 30, 2019. REUTERS/Henry Romero

MEXICO CITY (Reuters) - Mexico’s government has reached a deal with infrastructure firm Fermaca in its renegotiation of natural gas pipeline contracts signed under the last government, Mexican President Andres Manuel Lopez Obrador said on Wednesday.

“It’s progress for various reasons, firstly because we avoided bringing the conflict to international courts, and secondly because the contracts are being fulfilled,” Lopez Obrador told his regular morning news conference.

Mexico-based Fermaca was the only company yet to agree terms in the government’s renegotiation of seven gas pipeline contracts awarded under the previous administration, the initial details of which were announced two weeks ago.

Lopez Obrador said reworking the deals would save taxpayers $4.5 billion in total. Critics argue the renegotiation sets a worrying precedent and may discourage investment in Mexico due to uncertainty about how contracts will be treated in future.

State power utility the Federal Electricity Commission (CFE) said on Aug. 27 the initial accords had saved $3.74 billion.

Speaking alongside Lopez Obrador, the head of the CFE, Manuel Bartlett, said the deal with Fermaca to lower transportation rates would generate savings of $672 million.

Other companies affected by the overall renegotiation include Canada’s TC Energy Corp, Mexico’s Grupo Carso, a company controlled by billionaire magnate Carlos Slim, and IEnova, a Mexican unit of U.S. business Sempra Energy.

Reporting by Daina Beth Solomon, additional reporting by Miguel Angel Lopez; Editing by Dave Graham, Susan Fenton and David Gregorio

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