Through a payment of at least 100 million dollars, Canada's ATCO agreed to transfer to Mexico the ownership of an unfinished gas pipeline that was involved in a dispute with the Federal Electricity Commission (CFE), said officials close to the negotiation.
Reuters reported last October that the CFE would have to pay ATCO some $100 million in damages, interest and legal fees for the Ramal Tula gas pipeline, in the state of Hidalgo.
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The agreement to hand over the pipeline will release ATCO from liability and give President Andres Manuel Lopez Obrador the opportunity to finish the stalled project that was designed to supply natural gas to a power plant north of Mexico City, sources said.
Three people familiar with the matter said the agreement to deliver the project was reached after Lopez Obrador met in January with Canadian Prime Minister Justin Trudeau, who used their talks to raise the concerns of Canadian energy companies in Mexico.
Lopez Obrador later met with representatives of Canadian energy companies, including ATCO, and the details of the transfer were finalized in late February, one of the sources said. There was no payment involved in the transfer, two of them said.
The mutually beneficial deal contrasts with talks of unresolved disputes centered on Lopez Obrador's energy policies, which have pitted the United States and Canada against Mexico.
Neither ATCO nor CFE nor the Canadian government nor AMLO's office immediately responded to requests for comment.
Arguing that previous governments skewed the Mexican energy market in favor of private capital, López Obrador has taken a series of steps to strengthen state control of the sector.
However, U.S. and Canadian companies argue that his measures put them at a disadvantage and breach a North American trade agreement. In July, the US and Canadian governments began formal energy dispute settlement talks with Mexico.
ATCO went to arbitration because after López Obrador took office in 2018, the CFE canceled a contract the Calgary-based company made with the past administration to build the pipeline, arguing that the work was incomplete, Reuters reported.
By then, ATCO had already completed most of the 17-kilometer pipeline. However, the Canadian company said it could not complete the final section due to resistance from local communities and invoked force majeure.
The company argued that Mexico had not done enough to allow completion of the pipeline and the London Court of International Arbitration ruled in its favor, the sources said. Mexico paid up in December 2021, according to people familiar with the matter.
The previous government in Mexico initially valued the Ramal Tula project at $66 million when the contract was awarded in 2014.