Exclusive: Renewable firms in Mexico must contribute to grid backup

© Reuters. Federal Commission of Electricity (CFE) Director Manuel Bartlett attends a news conference at the National Palace in Mexico City

By David Alire Garcia

MEXICO CITY (Reuters) – Private renewable energy firms in Mexico should pay for part of the baseload power underpinning the flow of electricity on the grid, the head of the state power company said on Friday, as a dispute on the future of the local industry roils the market.

Manuel Bartlett, director of the Comision Federal de Electricidad, or CFE, told Reuters that his company nevertheless favors more clean energy and will seek to further reduce its use of fuel oil as a major source of power generation.

“Wind and photovoltaic (plants) don’t pay the CFE for the backup,” Bartlett said in an interview, referring to the cost of power generation from fossil fuels to ensure a uninterrupted flow to the grid. “And I can’t allow that.”

Last month, Mexico’s power grid regulator CENACE issued a ruling supported by Bartlett that prevented several dozen new renewable energy plants from connecting to the network.

CENACE cited the national crisis over the coronavirus pandemic as a justification, arguing that the intermittent nature of wind and solar power is not consistent with ensuring constant electricity supply.

The decision prompted letters of complaint to the energy ministry by the European Union and Canada, whose governments were upset that their companies had been shut out.

Mexican business associations also criticized the move, saying it puts more than $6 billion in renewable power plants scheduled to begin operating this year or next in limbo.

In a provisional ruling this week, a judge ordered CENACE to back down and allow the renewable firms to continue with tests needed to bring plants online.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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GM kicks off restart in Mexico as Lear Corp readies for return By Reuters

© Reuters. The GM logo is seen at the General Motors Assembly Plant in Ramos Arizpe

By Anthony Esposito

MEXICO CITY (Reuters) – General Motors Co (N:) said on Thursday it was gradually restarting the transmission and motor lines at its Mexican facilities in Silao and Ramos Arizpe, while U.S. auto parts maker Lear Corp (N:) also geared up for production.

GM Mexico said the assembly plants at Ramos Arizpe in the northern state of Coahuila, and Silao in the central state of Guanajuato, could restart operations on Friday depending on suppliers, and that it was assessing when to reopen plants in the central state of San Luis Potosi, and in Toluca, near Mexico City.

The steps to restart production are welcome news for the North American auto sector, with supply lines highly interconnected among the United States, Mexico and Canada.

Automotive factories in Mexico have been idled for weeks due to the coronavirus outbreak, which has infected 59,567 people and killed 6,510 in Mexico so far.

GM staff returning to work in Mexico must use personal protective equipment at all times, keep a “safe distance” of 1.5 metres (4.9 feet) from each other, and have their temperatures checked when entering the plant, a message to workers showed.

The government said last week that Mexico’s automotive industry could exit the coronavirus lockdown before June 1 if firms had approved safety measures in place.

Auto parts makers that are crucial to the supply chains are also taking steps to reopen, such as Lear Corp, whose clients include Ford Motor Co . (N:)

Some employees at Lear’s Rio Bravo plant in Ciudad Juarez on Mexico’s northern border were told on Thursday to return to work on Friday for activities including safety training, according to a message seen by Reuters.

Four workers at the plant, which supplies car-seat trim covers for Daimler AG’s (DE:) Mercedes-Benz and Ford’s Mustangs and Explorers, said they were told to return on Friday.

Lear did not immediately respond to a request for comment. It said earlier on Thursday that it was focused on preparations this week.

One of 42 sites Lear operates across Mexico, the Rio Bravo plant employs about 3,000 people and saw a coronavirus outbreak that killed 18 workers, the company has said.

Mexico’s government issued guidelines on Monday for restarting operations in carmaking, mining and construction even as coronavirus deaths hit new highs.

“The reopening is happening as the pandemic is hitting the country hard,” said Mauricio Usabiaga, economic development minister for Guanajuato, the state where Silao is located. “We have to be very careful, prudent and conscientious.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Mexico appears to delay auto industry restart to June 1 amid confusion By Reuters

© Reuters.

By Anthony Esposito and Sharay Angulo

MEXICO CITY (Reuters) – Mexico on Thursday pushed back by two weeks the reopening of automotive plants and the mining sector after the coronavirus lockdown, creating confusion among companies about how soon they can reconnect supply chains tied to U.S. manufacturing.

The government on Wednesday had indicated the auto sector would resume operations on Monday and published advice to that effect in its official gazette. It later withdrew the page from the gazette and on Thursday published fresh instructions in the gazette indicating the industry would not reopen until June 1.

“This would be a real crisis for suppliers,” said Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, a major U.S. auto parts industry group, referring to the possibility of not being allowed to resume production next week in Mexico.

Despite the intensifying challenge posed by the pandemic in Mexico, the United States and auto companies have been pressing its government to reopen factories quickly because automakers will struggle to operate without parts from south of the border.

Some lawmakers in President Andres Manuel Lopez Obrador’s ruling MORENA party had publicly expressed concern about a Monday restart in regions badly hit by the coronavirus outbreak.

Mexico’s Mining Undersecretary Francisco Quiroga on Thursday said certain safety protocols have to be carried out with the ministries of health and labour after May 18, which would take time, before the mining sector reopened.

“In principle, we are planning everything for a start on 1 June,” Quiroga told Reuters. “Reopening activities cannot be done from one day to the next.”

The uncertainty follows death figures that show Mexico’s pandemic is still increasing, despite government predictions that the virus would peak last week. Tuesday and Wednesday were the two most lethal days in Mexico’s outbreak, with 353 and 294 additional deaths.

The Mexican government is now indicating that companies should use the period between Monday and June 1 to put in place their safety protocols to mitigate the virus’ spread.

However, auto industry sources told Reuters that talks are still ongoing between Mexico and automakers and suppliers about when they can resume production.

Industry executives believe Mexico may still clarify whether they can begin production before June 1, the sources said.

If auto parts plants cannot resume next week, automakers would have to halt most production soon after they restart in the United States and could see shortages of key vehicles assembled in Mexico, the sources said.

“We are seeking clarity about the situation as soon as possible,” one Mexican industry source said.

One major industry body representing Mexican auto part manufacturers said it would not adhere to the new date of June 1 and considered the previous May 18 restart date as having legal force.

“We will start to operate according to page 29 of the decree published in the official gazette yesterday,” said Alberto Bustamante of the National Autoparts Industry lobby group. General Motors’ (N:) pickup plant in Silao is critical to the Detroit company’s North American operations and had been expected to reopen next week. “But just now I have just been told we will not restart until June 1. For now we will only be able to use the next weeks to get ready to restart the operation,” said a source in the Silao labor union, who asked not to be identified.

A GM spokeswoman, Teresa Cid, said the company had no comment about an official date to restart manufacturing operations in Mexico.

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Coronavirus update: Global case tally tops 4.28 million as Russia sees spike in cases, Brazil and Mexico suffer deadliest day yet

The number of global cases of COVID-19 rose above 4.28 million on Wednesday, as Russia counted another 10,000 infections and Brazil and Mexico suffered their deadliest day since the start of the pandemic.

Mexico suffered 353 deaths and confirmed 1,997 new cases in a 24-hour period, disappointing hopes following a lower tally earlier in the week that the illness was coming under control.

Other countries that were first in lifting lockdowns after strict measures succeeded in containing the spread also reported new cases. South Korea is still working to contact people infected at nightclubs in a recent outbreak in the capital Seoul, and the Chinese city of Jilin went into lockdown to contain a fresh cluster of cases, as Agence France-Presse reported.

A leaked White House coronavirus task force report showed that some rural areas of the U.S. are seeing infections spike by more than 1,000% in a week, NBC News reported. President Donald Trump said on Monday that cases are coming down “very rapidly” across the country, but the report shows the top 10 areas recorded surges of 72.4% or more over a seven-day period compared with the week earlier.

A set of tables used by the task force to track the spread shows spikes in Nashville, Tennessee; Des Moines, Iowa; Amarillo, Texas; and — atop the list, with a 650 percent increase — Central City, Kentucky, according to the report. The report has not been released to the public.

The tables show the pandemic is spreading outside of those regions that were early hot spots, including in states that never imposed stay-at-home restrictions or are now pushing to relax them, as Trump has repeatedly urged them to do.

Don’t miss:States start to reopen, ending coronavirus lockdowns: As parts of New York state prepare to take first steps, Broadway theaters to stay closed all summer

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned a Senate committee hearing on Tuesday about the risks and dangers of reopening the U.S. economy too quickly. Fauci also said the number of deaths from the illness is likely higher than the official tally given the shortage of testing and cautioned against assumptions such as believing children are immune.

See also: Dr. Anthony Fauci responds to rebuke by Rand Paul: ‘I give advice according to the best scientific evidence’

Latest tallies

There are now 292,619 fatalities from COVID-19, according to data aggregated by Johns Hopkins University. At least 1.5 million people have recovered.

The U.S. has the highest case toll at 1.37 million and the highest death toll at 82,461.

Russia overtook Spain by case numbers following another spike in infections. Russia has 242,271 cases and 2,212 deaths. Spain has 228,030 and 26,920 deaths.

The U.K. has 227,741 cases and 33,263 deaths, the highest death toll in Europe.

Italy has 221,216 cases and 30,911 deaths. France has 178,349 cases and 26,994 deaths.

Brazil has overtaken Germany by case number with 178,214 cases and 12,461 fatalities. Germany has 173,369 cases and 7,780 deaths. Turkey has 141,475 cases and 3,894 deaths. Iran has 112,725 cases and 6,783 deaths. China, where the disease was first reported late last year, has 84,021 cases and 4,637 deaths.

New York remains the U.S. epicenter with 343,705 cases and 27,284 deaths, according to a New York Times tracker.

Four states, Illinois, Florida, Connecticut and Pennsylvania, accounted for most of the rise in U.S. cases overnight, but cases rose in nine states in total, the data shows.

What’s the latest medical news?

Gilead Sciences Inc.

named five generic drugmakers that will produce remdesivir, its experimental COVID-19 treatment. The non-exclusive voluntary licensing agreements are with Cipla Ltd.
Ferozsons Laboratories Ltd.
Hetero Labs Ltd., Jubilant Life Sciences Ltd.
and Mylan NV

to manufacture remdesivir in 127 countries.

The Food and Drug Administration recently granted an emergency authorization to remdesivir in the U.S. as a treatment for severely ill COVID-19 patients; it has also been approved in Japan. Neither nation is part of these manufacturing agreements. China, where the virus was first detected in 2019, also isn’t listed.

Gilead said the licenses will be considered royalty-free until one of two things happens: the World Health Organization lifts its public health emergency of international concern declaration, or another drug or vaccine is approved.

The Federal Emergency Management Agency, or FEMA, canceled a $55.5 million contract for respiratory face masks made with a small Virginia company that had no experience in the mask business and a parent that was in bankruptcy, the Associated Press reported.

The no-bid contract, with Panthera Worldwide LLC, was one of the largest mask orders signed by FMEA as it scrambled to find masks and other personal protective equipment during the pandemic.

A FEMA spokeswoman said the contract for 10 million N95 masks was canceled Tuesday “on the grounds of nondelivery.” FEMA has said it wouldn’t pay Panthera until the masks were delivered.

Panthera’s two owners have been accused of fraud in lawsuits by business associates—which the owners deny—and both had IRS tax liens filed against them in 2018 for alleged unpaid taxes, the Wall Street Journal reported last month.

What’s the economy saying?

The wholesale cost of U.S. goods and services sank 1.3% in April — the largest decline on record — as the coronavirus bore down on the economy and cratered demand, as MarketWatch’s Jeffry Bartash reported.

It was the third straight decline and the biggest since the government reconfigured its wholesale report in 2009 to include services such as finance and health care. Economists polled by MarketWatch had predicted a 0.5% drop.

The rate of wholesale inflation in the past year also turned negative for the first time since 2015, tumbling to 1.2% in April from a small increase in March, the government said Wednesday.

Much of the decline was due to the slump in oil prices amid oversupply as drivers stay home.

“The core PPI will not continue falling at this pace, but the virus will remain a sustained disinflationary shock long after the initial hit from the lockdown has largely reversed,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.

See:Three stunning charts from U.K. GDP — including the spike in toilet paper demand

What are companies saying?

Tesla Inc.

Chief Executive Elon Musk seems to have made progress in his battle with a California county for permission to reopen the company’s plant in Fremont. Alameda County officials said they have reviewed his site-specific plan for safety at the plant and if he complies with added recommendations, and public health indicators remain stable or improve, the plant could reopen as early as next week.

Musk has already reopened the plant and had even tweeted that if local authorities want to arrest someone for breaking lockdown rules, it should be him. The plant, which employs 10,000 workers, has been closed since March 23. Musk has complained that the county was not moving as fast as the state in easing restrictions.

See:Tesla’s California plant reopens despite shutdown order, Elon Musk dares county to arrest him

Uber Technologies Inc.’s

merger talks with Grubhub Inc.

were called a “new low in pandemic profiteering” by a member of Congress on Tuesday, and that’s just one issue that could thwart a potential combination of the food-delivery companies, as MarketWatch’s Therese Poletti writes.

Just hours after a Wall Street Journal report revealed the talks, Rep. David Cicilline, a Democrat from Rhode Island, slammed the deal, which has support on Wall Street.

“Uber is a notoriously predatory company that has long denied its drivers a living wage. Its attempt to acquire Grubhub — which has a history of exploiting local restaurants through deceptive tactics and extortionate fees — marks a new low in pandemic profiteering,”Cicilline, who is also House antitrust subcommittee chairman, said in a statement.

Elsewhere, there was a flurry of bond offerings announced early Wednesday, as companies move to bolster liquidity and conserve cash during the pandemic.

Here are the latest things companies have said about COVID-19:

• Boyd Gaming Corp.

is offering $500 million of senior notes that mature in 2025 in a private placement. The Las Vegas-based company will use the proceeds for general corporate purposes, including working capital. Many U.S. companies are currently issuing bonds or tapping credit lines to bolster liquidity during the pandemic.

• Becton Dickinson & Co.

is offering $1.5 billion in 10-year and 30-year notes, as the medical technology company looks to repay $1 billion in debt due this year. The offerings include $750 million in 2.823% notes due 2030 and $750 million in 3.794% notes due 2050. That compares with the yield on the 10-year Treasury note of 0.678% and the yield on the 30-year Treasury bond of 1.381%. The company said it expects to use the proceeds plus cash on hand to repay the $1 billion in 2.404% notes due 2020, and to fund a partial redemption of its 3.250% notes, also due this year.

• The Container Store Group Inc.

expects fiscal fourth-quarter sales of $241.3 million, down 4.7% from a year ago, mostly because of the pandemic. Same-store sales are expected to fall 3.6%. The quarter was tracking the company’s “expectations” until the last few weeks of the period, when store closures and other business disruption started. Analysts polled by FactSet expect fourth-quarter sales around $250 million. The retailer is expected to report a complete fourth-quarter picture next week. The Container Store had a cash balance of about $67.8 million at the end of March. Total debt, net of deferred financing costs, was $333.5 million, and liquidity was $96.4 million at the end of the quarter.

• DraftKings Inc.

shares fallied after reports emerged that famed investor George Soros owns 2.7 million shares of the Class A stock through an investment vehicle called Quantum Partners. DraftKings disclosed the holding in a filing with the Securities and Exchange Commission last week. Other investors include Walt Disney Co.
which operates the sports channel EPSN, and the National Hockey League.

• Networking company Infinera Corp.

reported larger quarterly losses than expected amid the pandemic. Infinera, which mostly sells networking equipment to telecommunications firms, reported a first-quarter loss of $99.3 million, or 55 cents a share, on sales of $330.3 million, up from $292.7 million a year ago. After removing some costs, including some related to COVID-19, the company claimed a loss of 27 cents a share, worse than a loss of 23 cents a share in the same quarter a year ago. Analysts had projected an adjusted loss of 18 cents a share on sales of $318.3 million, after Infinera guided for adjusted losses of 15 cents to 21 cents a share. Infinera guided for second-quarter sales of $309 million to $329 million with negative operating margins.

• Live Nation Entertainment Inc.

is planning to issue $800 million in senior secured notes that mature in 2027 in a private deal. The ticketing company said it would use the proceeds for general corporate purposes.

• Plug Power Inc.

is offering $200 million in convertible senior notes that mature in 2025 in a private offering. Proceeds of the deal will be used to fund capped call transactions that seek to minimize dilution once the bonds convert into stock, and for “eligible green projects,” the maker of hydrogen and fuel-cell technology said. The notes will be convertible into cash, common stock or a combination, at Plug Power’s discretion.

• Potbelly Corp.

reported a wider quarterly loss and sales that were below Wall Street expectations even as its delivery, drive-through, and takeout sales rose 45% in April. “Simply put, the pandemic arrested the strong turnaround momentum we initiated in Q4 last year,” Chief Executive Alan Johnson said. “We understand challenges will persist over the next several months, and are taking the necessary steps to support and fortify our business.” Potbelly drew down its $40 million credit facility and cut costs and expenses, it said. It is negotiating with landlords and considering closing up to 100 shops, the company said.

• Royal Caribbean Cruises Ltd.

launched a private offering of $3.3 billion in senior secured notes due 2023 and 2025. The notes will be backed by 28 of its vessels and intellectual property. The company expects to use the proceeds from the offering to repay its $2.35 billion, 364-day term loan agreement, that was disclosed on March 23. The remainder of the proceeds is expected to be used for general corporate purposes, which could include repayment of other debt.

• Twitter Inc.’s

nearly 5,000 employees may work from home as long as they wish as the San Francisco-based company re-engineers operations in the age of COVID-19. Twitter Chief Executive Jack Dorsey told employees in a note Tuesday that most of them would be allowed to continue to work from home even after the global health crisis passes. Those who return to the office will not be allowed to until at least September, and all travel will be severely cut back, Dorsey added.

• Uber Technologies Inc. and Grubhub Inc. cannot agree on a price that the ride-hailing company would pay to acquire the food delivery business, according to a CNBC report. CNBC said that Uber had rejected an all-stock offer. Earlier Tuesday, The Wall Street Journal reported that Grubhub proposed a deal in which its investors would have received 2.15 Uber shares for every share of Grubhub, valuing the company at roughly $6.25 billion. The Journal also reported that Uber’s board was expected to review the proposal in the “coming days.”

• Walt Disney Co. disclosed the maturities of a six-part bond deal the media and theme park company announced plans for earlier this week|, with maturities ranging from six years to 40 years. The $11 billion offering includes $1.5 billion, 1.75% notes due 2026; $1 billion, 2.20% notes due 2028; $2.5 billion, 2.65% notes due 2031; $1.75 billion, 3.50% notes due 2040; $2.75 billion, 3.60% notes due 2051; and $1.5 billion, 3.80% notes due 2060. Disney’s long-term credit is rated A- at S&P Global Ratings. Disney plans to use the proceeds from the debt offering for general corporate purposes, including the repayment of debt due June 2020.

Here’s how the global supply chain may change after COVID-19

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Pemex slides into junk as Moody’s cuts Mexico credit rating By Reuters

© Reuters. The logo of Mexican oil company Pemex is pictured at Reynosa refinery, in Tamaulipas state

By Stefanie Eschenbacher

MEXICO CITY (Reuters) – Ratings agency Moody’s on Friday downgraded Mexico’s credit rating due to the country’s poor economic outlook and cut the debt of state oil firm Pemex to junk status in a serious blow to President Andres Manuel Lopez Obrador.

Moody’s Investor Service said it had cut Mexico’s creditworthiness to “Baa1” from “A3”, and lowered the rating of the heavily indebted, loss-making Pemex to “Ba2” from “Baa3”.

Though Mexico retains an investment-grade rating, Pemex’s drop to junk is expected to ramp up financing costs for the firm formally known as Petroleos Mexicanos.

“It’s likely that next week we will see strong outflows from Pemex bonds,” said Luis Gonzali, a portfolio manager at asset manager Franklin Templeton.

“While I believe Moody’s was benevolent with the sovereign’s rating, it wasn’t with Pemex’s rating, which, inevitably, now enters the universe of speculative bonds.”

Moody’s became the second main ratings agency after Fitch to downgrade Pemex to junk. That is likely to trigger a fire sale of billions of dollars of bonds among investors whose mandates stipulate they must hold assets of investment quality.

Mexico’s economy entered a mild recession in 2019 and private sector analysts forecast gross domestic product could shrink by up to 10% this year due to the coronavirus crisis.

Lopez Obrador, a leftist oil nationalist, has staked his reputation on reviving Pemex, which has been a powerful symbol of Mexican self-reliance since its creation in 1938.

But ratings agencies have for the past year criticized the president’s plans, which include building an $8 billion oil refinery and taking away incentives for private companies to participate in the energy sector.

In a statement, Moody’s said the government’s responses under Lopez Obrador had been “insufficient to effectively address both the country’s economic challenges and Pemex’s continued financial and operating problems.”

The ratings agency also maintained a negative outlook.

S&P Global Ratings, which uses a different scale and pegs Pemex ratings to the sovereign, in March cut the ratings of both Mexico and Pemex to BBB, keeping both in investment grade.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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