Tenaris stated that the recent energy reform in Mexico may negatively affect its Techgen subsidiary.
Today, Techgen is owned by Ternium at 48%, Tecpetrol at 30% and Tenaris at 22%.
With operations since December 1, 2016, Techgen operates an electric power plant in Pesquería, Mexico.
As a result of this alliance, Ternium and Tenaris contract 78 and 22%, respectively, of Techgen’s energy capacity.
Techgen also sells to third parties on behalf of Tenaris the unused electricity that Tenaris purchased from Techgen.
In March 2021, the Mexican Congress approved a major reform to the energy market in Mexico.
Among other changes, the new Energy Industry Law (LIE) gives priority to the state electricity generation and distribution company (CFE) over its competitors in the supply of electricity to the Mexican market and orders a review of generation agreements and energy transaction between the federal government and independent electricity providers.
In addition, the LIE eliminates mandatory power supply auctions for power supplies that require the use of CFE’s distribution network.
The new LIE, which is still subject to the applicable regulations of the competent authorities, has already been challenged in court by the affected players.
“There is uncertainty about the final outcome of the judicial review and the energy reform could negatively affect Techgen’s operations,” said Tenaris.
In 2019, Techgen entered into a $ 640 million syndicated loan agreement with various banks to refinance an existing loan, resulting in the release of certain corporate collateral issued by Techgen shareholders.
Techgen’s obligations under the current line, which is “non-recourse” to sponsors, are guaranteed by a Mexican security trust that covers Techgen’s shares, assets, and accounts, as well as the rights of Techgen’s affiliates under certain contracts. .
In addition, a Tenaris subsidiary entered into a 25-year contract (effective from December 1, 2016 to December 1, 2041) with Techgen for the supply of 197 MW.
Techgen’s net electricity sales to Tenaris amounted to $ 48 million in 2020, $ 40 million in 2019, and $ 36 million in 2018.
In 2020, Tenaris net sales were $ 5.147 million, a drop of 29.4% year-on-year, while recording a loss of $ 642 million compared to its gain of $ 731 million in 2019.