AMLO puts at risk US $ 22,000 million in energy contracts

The electricity reform proposed by Mexican President Andrés Manuel López Obrador could present difficulties for the more than US $ 22,000 million in solar, wind and other renewable energy facilities owned by major foreign companies such as Iberdrola SA and Sempra Energy.

The bill proposed to lawmakers last month would cancel some electricity generation permits granted to foreign operators and give priority to former hydroelectric, nuclear and natural gas plants managed by the state-run Federal Electricity Commission, or CFE.

Wind and solar projects would move to the bottom of the list, beating only gas and coal generation from non-state providers. The bill seeks a constitutional guarantee that the CFE owns 54% of the market compared to 38% today.

Although non-state companies would hold up to 46% of the electricity market, a review of current contracts is expected. Up to 15,000 megawatts of clean power generation are at stake, according to BloombergNEF.

Lopez Obrador He came to power promising to expand state control of Mexico’s energy by reducing previous market-friendly reforms. It has been criticized by renewable energy companies and environmental groups for pushing a heavy fossil fuel agenda at a time when other nations are working to curb emissions.

Foreign companies have invested heavily in Mexico since its electricity market was opened to private investment in 2013 and 2014.

Renewable energy lobbyists have warned that the proposed changes could undermine promises Mexico made under the Paris Agreement on climate change.

Getting the bill passed will not be easy and will require AMLO’s ruling party, Brunette, and legislative allies persuade opposition lawmakers to obtain the two-thirds majority required for passage in both houses. The measure also requires approval by a majority of state legislatures.

The current session of Congress ends in mid-December, leaving lawmakers only a few weeks to work out the details of any deal. Federal and state lawmakers are expected to vote in full on the bill in mid-April, according to Ignacio Mier, leader of Brunette in the Chamber of Deputies.

Bonuses CFE fell, indicating that investors are not expecting the bill to get final approval. The political risk consultancy Eurasia Group gives the measure only a 30% chance of approval.

Still, officials from the opposition PRI party have told Bloomberg that there is a chance it will succeed after its own leaders said they want to debate the measure and not reject it outright.