The new administration at Mexico’s state-owned utility Comisión Federal de Electricidad (CFE) announced the creation of several new internal units, further demonstration of a push to reorganize the company’s structure following changes implemented by the country’s 2014 energy reform.
In a Sept. 26 press conference, Miguel Alejandro López, Administration and Services Coordinator at the CFE, announced the creation of three new internal units within the company to strengthen the utility’s regulatory framework, streamline purchases and introduce more controls to reduce opportunities for corruption within the company, he said.
“One of the principal products of the energy reform was to butcher the CFE with a claim that it would give autonomy to new areas,” López said in reference to the restructuring of the CFE in the previous administration that created several subsidiary and affiliate companies. “It created many more areas for contracts within the corporation, which opened opportunities for corruption, and what we ended up with is more corruption.”
The creation of the new units aligns with the administration’s aspirations to “rescue” the company, CEO Manuel Bartlett said during the event. Since Bartlett took over at CFE in December, he has repeated that the mandate from President Andrés Manuel López Obrador is for the company to serve the people of Mexico and act less as a profit-driven corporation.
An important step towards accomplishing that goal requires “permanent supervision” by the new units to “make the contracting process more efficient to promote participation and competition,” according to López, the CFE Administration and Services Coordinator. He said that the new entities will assure more savings and more transparency, and that CFE will implement an electronic system to create a more agile, efficient process for future bid rounds.
The announcement of the new teams comes on the heels of another CFE modification to its structure, announced on Sept. 23 in Mexico’s official gazette, known as the DOF. In an effort to “make processes more efficient and reduce generation costs,” the CFE created a Monitoring and Operative Analysis Coordination unit within its Corporate Operations division to support the company’s energy generation businesses, known together as EPS.
The Monitoring and Operative Analysis Coordination will assist with “the analysis and planning of requirements for fuels in the short, medium and long-term; as well as to assist with budgetary management of fuels,” according to the DOF statement.
The unit was formed to monitor natural gas and LNG consumption and purchases and reduce costs for the company’s six generation companies, or EPS. It aims to provide better transparency of purchases and commercial fuel transactions made by the CFE and will require that electricity generation contracts signed by affiliate CFEnergía are reviewed by the company’s central commercial business unit.
“The way to control corruption is to establish clear systems and the capacity to analyze prices and the market in general,” Bartlett said in the press conference. “This requires the creation of a team that has the ability, first and foremost, to manage the important amount of purchases that the CFE makes.”
The rescue plan implemented at the CFE this year is starting to bear fruits, said José Antonio Rojas Nieto, the company’s Chief Financial Officer, during the same event on Sept. 26.
Rojas outlined the steps taken to improve the company’s financial standing this year and forecasted revenues of 470 billion pesos ($24 billion) for 2019. The forecasted revenue for the year is largely buoyed by an anticipated $400 billion pesos in energy sales, he said.
Despite measures to generate more savings, CFE will still likely have a budget deficit, Rojas said, given that expenditures for the year are forecast to be above 500 billion pesos ($25.3 billion). One of the principal expenses for CFE is the continued purchase of fuel oil that is burned to generate electricity, he said, adding that CFE spends 180 billion pesos ($9 billion) for the hydrocarbon as a result of diminished natural gas production.
Rojas said the 2020 budget has a better outlook.
“We are going to have more gas available to substitute for fuel oil,” he said of the 2020 forecast. “The agreements and negotiation of the pipeline contracts” will also help, he added.
“It is very probable that we will have a financial balance much more positive next year,” Rojas said.
Bartlett Denies Allegations
CEO Bartlett said in the conference that he has never been involved in or associated with corruption or wrongdoing throughout his political career that spans several decades.
In recent weeks, Bartlett has come under fire following reports published in the newspaper El Universal that claim he failed to disclose familial ties to several properties and companies in his public wealth declaration. According to Mexican law, public servants must declare the extent of their wealth, including salary and assets, prior to or during employment by the government.
In a Sept. 25 press conference, President López Obrador came to the defense of Bartlett, saying that the reports linking him to corruption were “dishonest” and that he was a victim of a smear campaign.
“I emphasize and ratify today that what I have declared to the authorities is what I possess, not one peso more or one peso less,” Bartlett said on Sept. 26. “I can tell you today that, as has always been the case, that throughout my life I have never been accused of corruption and it has been an honor for me to have an absolutely clean record.”
Meanwhile CFE International LLC (CFEi), the U.S.-based marketing arm of the CFE, has issued a Request for Proposals (RFP) for the supply of natural gas for the period of November 2019 to November 2021.
Proposals will be accepted to CFEi’s email address email@example.com until 6:00 p.m. CT on Oct. 9.