Mexico's petrochemical privatization in doubt

Further doubt is looming for Mexico's planned privatization of the state-run Morelos petrochemical complex.

Mexico is slated to reveal on Feb. 19 the winning bid in the sell-off of a 49% stake in the plant, but the Energy Secretariat has announced that iti will give the winner an extra week to form an alliance with other companies to complete the purchase.

The extension suggests that the two Mexican companies registered in the bidding, Alpek and Idesa, have thus far had difficulties finding partners to form bidding groups in the highly-questioned minority privatization process (OGJ, Sept. 21, 1998, p. 44).

Under the bidding rules, foreign companies may take only a 49% stake in the group bidding for the minority interest. This limits a foreign firm's total participation in the plant to less than 25%.

While the administration of President Ernesto Zedillo had originally proposed to sell off the plants entirely, the current scheme was forced on the government due to political considerations. The 49% scheme is viewed skeptically by many in the industry, and even some government officials.

Morelos bidding

Mexican companies Idesa and Alpek are registered to bid for Morelos and have been actively seeking foreign partners.

The winner of the bidding will be obligated to invest $49 million to upgrade the plant, while state firm Petroleos Mexicanos is committed to investing $51 million of the money it obtains from selling the share. The winner is also required to maintain its investment for at least 3 years, at which time it may choose to sell its stake to a third party.

Mexico's Energy Secretary, Luis T?llez, implied that, should the undisclosed minimum bid for the Morelos plant not be reached, the government would reconsider the scheme. "We hope that the bidding works, but if it doesn't work, we will let everyone know what the policy on the petrochemical industry will be," T?llez said.

Built in 1994, the Morelos complex is the newest of Pemex's so-called "secondary" petrochemical plants (primary units being refineries and gas plants). It is considered the most attractive to private investors.

Located in the Gulf Coast state of Veracruz, Morelos is just outside the industrial city of Coatzocoalcos, near two other petrochemical plants and a major refinery.

Tellez told reporters in Villahermosa, Mexico, that the sell-off of a 49% stake in Mexico's six other secondary petrochemical plants will not proceed until the results of the bidding for the Morelos plant are in: "We are going to wait to see what happens with the Morelos complex and, at mid-February, see if indeed there was enough of an offer to buy the 49% of the shares."