CFE Cuts Losses by 30% as Rain Cheapens Mexican Power

Comision Federal de Electricidad is narrowing losses as Latin America’s biggest utility increases electricity production from natural gas and hydro plants, reducing its dependence on more expensive fuel oil.

Mexico’s state power company, known as CFE, had a loss of 30.1 billion pesos ($2.1 billion) in the first 11 months, a 30 percent decrease on the year-ago loss, Chief Executive Officer Enrique Ochoa said in an interview at his Mexico City office. Sales rose more than 5 percent to 307 billion pesos, he said.

CFE is benefiting from increased rainfall that boosted hydropower dam levels and projects aimed at increasing gas production and distribution as Mexico’s energy industry opens up to private investment. The company is also reducing technical power losses and theft.

“If we optimize our generation resources, substitute expensive fuels for cheap ones, and upgrade old technology for new technology, each year we will be able to operate with less costs,” Ochoa said yesterday. “We are moving in the right direction.”

CFE announced bids for 23 electricity infrastructure and gas projects in the second half of the year, requiring an estimated investment of $8.6 billion, as Mexico is planning to expand its pipeline network by 75 percent by 2018.

Geothermal Opening

CFE will submit bids to the energy ministry next month seeking geothermal projects as well as development areas the company hopes to retain in an upcoming auction known as round zero, Ochoa said. Mexico’s energy overhaul approved last year modified a constitutional article to allow for private investment in geothermal projects.

“There is a great opportunity for geothermal energy in Mexico,” Ochoa said. “It has not been explored much and has been difficult to develop. I am convinced that this legal change is going to result in geothermal energy taking off.”

The energy ministry has 120 days to determine the geothermal areas that CFE will maintain, while remaining areas will be auctioned off in subsequent open bidding rounds, Ochoa said. CFE will also consider establishing joint ventures with private companies to develop geothermal projects, he said.

International interest

CFE has been in touch with “all the relevant companies in the energy industry and all have interest in participating” in Mexico, Ochoa said. CFE will seek to create joint ventures in electricity-generation projects as the company transforms into a private operator, he said.

CFE has received interest from Asian companies such as Sinohydro Corp., which is bidding on a hydroelectric dam in southern Mexico as a joint venture with national company Grupo Omega, Ochoa said. Empresas ICA SAB is the other bidder for the project, which will be awarded next month by CFE, he said.

Yields on the CFE’s notes due in 2024 have fallen 68 basis points this year.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE