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    VANGUARDIA Forum: CFE clarifies on coal purchases


    November 19, 2021 - CE Noticias Financieras

     

      Armando Castilla

      General Manager

      Vanguardia

      In relation to the text "After years, CFE announces tender for the purchase of coal", published in VANGUARDIA Mx on November 16, 2021, signed by Mauricio García, I would like to make the following comments.

      The note states -falsely- that the CFE "had not acquired coal orders through the scheme of multi-year contracts in recent years". We want to clarify that in 2020 alone 60 multi-year contracts were signed (2020-2021) with micro, small, medium and large producers, equivalent to 1 million 580 tons considering an amount of 1,634 million pesos of coking coal.

      The text also states that the CFE "will buy more than five million tons of coal" and that "will give priority of direct award to coal miners who have a current contract", at least 70 producers in the area. This is incorrect. At the moment the CFE is analyzing potential suppliers and conducting market studies to determine the market price per ton.

      Later in the text it is mentioned that the CFE "pays a ton of coal at one thousand eighty-six pesos, however from 2022, the cost per ton would reach one thousand three hundred pesos. Currently the CFE analyzes the coal market to acquire the mineral directly with producers at fair prices, so it does not have the maximum contracting price for the acquisition.

      The note lacks precise technical elements. As a matter of principle, it confuses the types of coal that are acquired by the CFE. The CFE has two coal-fired power plants in Coahuila (C.T. José López Portillo and C.T. Carbón II). Both use a mixture of two types of coal for power generation: coking bituminous coal - used in the steel sector (20%) - and non-coking subbituminous coal - used for electricity generation (80%).

      Regarding coking coal (referred to in the note), it is important to say that its use in the mix is part of a historical social policy. This administration complies with the presidential instruction to contribute to the productive development of the coal region under the principles of zero corruption, zero coyotaje, fair prices, preference to micro, small and medium producers and honesty to acquire coal and not land.

      The contracts of past administrations were made with hegemonic suppliers, without planning, with the highest prices in the market and without the coal delivered complying with the required quality and specifications. For this reason, this government rescinded disadvantageous contracts and designed a mechanism of progressive distribution in the distribution, contemplating direct contracts -without intermediaries- with the producers, guaranteeing greater participation and avoiding that only the large marketers and producers monopolize the market.

      The note says that "[t]he commission awarded 15 contracts for almost three billion pesos, through direct awards [...]. These agreements [...] avoided a bidding process or an invitation to at least three private parties to ensure the lowest price and the best purchasing conditions, as indicated in the Economic Competition Law. [...] The firm that obtained the most money for the contracts was Minerales Don Chilo, obtaining three contracts amounting to 1.61 billion pesos, one third of the total coal purchases by the Federal Electricity Commission. It is important to clarify that this data refers to non-coking coal, which, as explained above, is different in its technical characteristics. Thus, this data is also erroneous. In addition, 14 multi-year contracts for non-coking coal were concluded in 2021 based on: 1) the needs and technical specifications of the Power Plants, 2) market studies to contemplate the production capacities expressed by potential suppliers, 3) quality certificate analyses, 4) quotations submitted, and 5) existing commercial conditions. In the case of Minerales Don Chilo S.A. de C.V. it was awarded 898,286 tons at $898 pesos per ton and 300,000 tons at $850 pesos each. The latter is even less than what was established in the market study.

      Appealing to our constitutional right to reply, I ask you to kindly publish this letter of clarification.

      ATTENTIVELY

      Luis Bravo Navarro

      CFE Corporate Communications Coordinator

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