Dispute Over Natural Gas Contracts
A significant dispute has emerged between the Comisión Federal de Electricidad (CFE) and Goldman Sachs, centered on natural gas contracts. The CFE claims that the merchants who initiated the agreement in its subsidiary were not authorized to do so, resulting in an outstanding debt of $400 million.
Background of the Dispute
The dispute revolves around natural gas contracts signed in 2016 and 2017 under the previous Mexican administration. These contracts are currently under investigation for possible corrupt practices, including influence peddling. The CFE’s subsidiary, CFE International (CFEi), is a major player in the US gas sector and has also become a dominant force in the Mexican natural gas market, surpassing the state oil company Petróleos Mexicanos (Pemex).
The Situation and Million-Dollar Debt
The debt of $400 million arose from natural gas transactions that occurred when prices skyrocketed following a freak winter storm in Texas. The prices in the Houston Ship Channel reached $400,000 per MMBtu on February 16 and remained high for several days. The CFE trading subsidiary owes Goldman $400 million for these transactions.
Consequences of the Dispute
The price of paying Goldman Sachs could ultimately be borne by Mexican families who suffered power outages during the freeze. The CFE has proposed reducing the electricity bill for retirees by 50% in 2025. The dispute has turned into a bitter argument, with the CFE arguing that the merchants who initiated the operation in their subsidiary were not authorized to do so, and Goldman insisting that the contract is a binding obligation that must be fulfilled.
Contractual Obligation
Goldman Sachs maintains that the contract is a routine natural gas agreement that was closed with CFE International. The bank’s obligations were linked to a monthly gasoline price index, while the CFE was exposed to daily rates in certain centers. The daily price multiplied by almost 100, leaving the CFE subsidiary with a significant debt. The CFE argues that the contract is not valid due to the extreme and unpredictable price and that Goldman did not obtain explicit consent from the parent company as guarantor of the exchange.
