Mexico Energy Overhaul Opens Door for CFE’s Gas Ambition

Comision Federal de Electricidad, Mexico’s state power company, plans to enter the natural gas business after Congress broke a 76-year state energy monopoly.

A bill passed in December will allow CFE to provide gas services and seek private partners in generation projects, Chief Executive Officer Enrique Ochoa said today at the Bloomberg Economic Summit in Mexico City.

By allowing foreign investment in the energy industry for the first time since 1938, Mexico is looking to increase natural-gas supply, reduce its dependence on U.S. imports and lower the cost of electricity generation. For CFE, that would lead to greater operating efficiencies and returns, Ochoa said.

“The reform opens the opportunity for CFE to evolve from an electricity company to an energy company,” he said.

Mexico’s ability to tap its large gas reserves has been limited by the state monopoly, Ochoa said. The country needs to invest in expanding its network of pipelines, Ochoa said.

The energy overhaul could boost foreign investment by as much as $15 billion annually and potential economic growth by half a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report. Secondary laws needed to implement the changes are expected to be passed by the end of April, Ochoa said.

About a third of Mexico’s electricity is generated by private companies, which sell to large companies, Ochoa said. By allowing them to also sell to small and medium businesses, that proportion will increase, Ochoa said.

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