Mexico Power Utility Seeking $899 Million in Pipeline Dispute

MEXICO CITY (Reuters) - Mexico's national power company CFE said it is seeking $899 million in a dispute with natural gas pipeline firms, adding that talks with Canada's TC Energy Corp and businessman Carlos Slim's Grupo Carso would start within days.

The Comision Federal de Electricidad (CFE) is seeking to negotiate "fairer" terms for a number of pipeline contracts signed by Mexico's previous government. President Andres Manuel Lopez Obrador has questioned the contracts, arguing they are too costly.

The dispute has led to diplomatic friction with Canada and concerns that Lopez Obrador’s government could put in jeopardy contracts signed under previous administrations he characterizes as part of a corrupt "neo-liberal" era.

CFE head Manuel Bartlett lashed out at the critics of the Mexican government's efforts to rework the deals, suggesting they were ill informed about the process and that the companies had sought arbitration before the government did so.

The pipeline companies "pursued arbitration before entering into negotiations with us," Bartlett told reporters, saying the government wanted to recover $899 million in payments made to pipeline companies

The companies involved include U.S.-based Sempra Energy's Mexican unit IEnova, Canada's TC Energy and Mexican firms Fermaca and Grupo Carso.

The CFE has challenged the contracts through a mediation process overseen by the London Court of International Arbitration (LCIA).

The LCIA declined to comment on Tuesday "owning to the confidentiality" of the arbitration process.

The CFE began talks with pipeline builder Fermaca on Monday, Bartlett said. He said talks with the other companies would begin in the next few days.

One of the pipelines at the center of the dispute is known as the Gasoducto Marino Sur de Texas-Tuxpan and was completed this month. But for transportation services to begin, the CFE still had to issue a notification acknowledging the work had been completed, IEnova has said.

Not only have Canada and others raised concerns about the dispute, Moody's ratings agency said the spat was "credit-negative" for the utility, the companies involved and the sector as a whole.

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