Fotowatio sues Mexico before the ICSID, the arbitration body of the World Bank | Economy

The Spanish firm with Saudi capital Fotowatio Renewable Ventures has filed an arbitration claim before the International Center for Settlement of Investment Disputes (ICSID), the arbitration body dependent on the World Bank based in Washington, according to the website of the mentioned organization. It is one more chapter in the confrontation of the Government of Andrés Manuel López Obrador with energy companies, particularly in the renewable energy sector.

The Fotowatio group presents its claim through three companies: Fotowatio Renewable Ventures SLU, FRV Solar Holdings III, SLU and FRV Solar Holdings VI, SLU The first is the head of the group, while the other two are holding companies. The companies allege that the bilateral agreement for reciprocal investment protection signed between Spain and Mexico in 2006 has been violated in relation to an investment by the group in a renewable energy generation company.

The arbitration demand was presented this Wednesday and in it the companies are represented by the Paris and Washington offices of the Freshfields Bruckhaus Deringer law firm as well as by the lawyers of the Mexican firm Galicia Abogados. For its part, the representation of Mexico corresponds to the General Directorate of Legal Consulting for International Trade of the Ministry of Economy.

The information available does not reveal the amount claimed or the specific reason for the arbitration demand. The Energy Regulatory Commission (CRE) of Mexico has denied permits for the generation of solar energy to several companies in the group, such as FRV Duna Solar and FRV San Isidro, but in addition, the group is in litigation over the San Luis de Potosí, a 342 MW project in the San Luis de Potosí region.

Paralyzed project

The project came into operation in May 2019, but could not dispatch energy since December 14, 2021, due to network restrictions established by the National Energy Control Center (Cenace), a situation that remained as of the date of formulation of the group’s accounts for 2022, the latest available.

In these accounts, Fotowatio Renewable Ventures indicated that the operation of the plant had been stopped and that the decision to reconnect it depended on Cenace. The group’s subsidiary filed a claim with the CRE challenging Cenace’s instructions to suspend operations and resorted to external legal advice on the dispute, which indicated that the subsidiary has all the permits and authorizations necessary to manage and exploit the San Juan solar park. Luis de Potosí.

To “neutralize the unfair measure” adopted by Cenace, FRV management took legal action, but despite some favorable rulings from the courts, the organization continued to deny daily operating licenses. The company’s lawyers hoped to obtain a favorable ruling in the protection against Cenace to reconnect the San Luis de Potosí solar plant to the National Transmission Grid.

On May 8, 2023, Fotowatio Renewable Ventures SLU, FRV Solar Holdings VI, SLU and FRV Solar Holdings III, SLU submitted a notice of intent to the Government of Mexico under the Agreement for the Promotion and Reciprocal Protection of Investments between Mexico and Spain. The purpose, according to the company, was “to seek communications and negotiations with the Mexican Government before, if FRV deems it necessary, referring the dispute to international arbitration.” The filing of the arbitration claim indicates that the negotiations did not fail.

The company FRV Solar Holdings VI reported impairments amounting to approximately 70 million dollars for its Mexican subsidiaries, as recorded in its 2022 annual accounts filed with the Commercial Registry.

In August 2022, FRV signed an agreement with the Mexican company Zuma Energía to sell the Potrero solar plant, a 342 MW project in the Aguascalientes region (Mexico). Said agreement was subject to suspensive conditions that were met in December 2022.

At the end of 2022, the FRV Group had consolidated assets of 2,117 million euros and accounting net worth of 639 million, according to its annual report. In the growth phase, its turnover was 174 million euros and it suffered losses of 54 million. Through a Dutch firm, it is owned by the Saudi group

The Mexican Government has been in confrontation for years with companies in the renewable energy sector over regulatory changes and restrictions on the operation of plants. In 2019, several multinationals launched litigation against the Executive after it changed the rules of the Clean Energy Certificates (CEL), an instrument designed to boost private investment in the sector.

López Obrador announced last month a new reform to the Electrical Industry Law that aims to give more powers to the CFE after the Supreme Court ruling that invalidated his first reform by declaring it unconstitutional.

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