"Mexico Power Report Q2 2016" Published

From: Fast Market Research, Inc.
Published: Sun Feb 21 2016

Progress in the implementation of power sector reform s - with the wholesale electricity market set to be launched and the state utility CFE in the process of being unbundled - support our positive outlook for Mexican power market. These reforms, coupled with solid macroeconomic fundamentals, vast public investment plans and a generally supportive regulatory environment for renewables, will create business opportunities for private investors - with the natural gas, wind and infrastructure sector s to outperform.

Latest Updates And Structural Trends

In January 2016, Mexico's Ministry of Energy (the Secretaria de Energia, Sener) published on the country's official gazette a piece of regulation outlining the separation of state-controlled utility Comision Federal de Electricidad (CFE) in a number of independent companies that will carry out the activities of power generation, transmission, distribution and commercialisation - previously concentrated in the CFE. The creation of these subsidiaries, which will have operational independence from each other, is expected to be completed within H116.

Full Report Details at
- http://www.fastmr.com/prod/1119140_mexico_power_report_q2_2016.aspx?afid=301

The unbundling of the CFE is a crucial step towards the successful implementation of a wholesale power market in Mexico, whose first phase is scheduled to be launched by the end of January 2016. While competition and efficiency in the Mexican power market will actually be fostered by the reform only if governing bodies comply with their mandates of avoiding unfair cooperation between the separated units of the CFE, the start of the restructuring process is a positive sign for potential investors in the Mexican power sector.

Mexico's positive macroeconomic trajectory supports our forecast for strong growth in power consumption over the next ten years. Despite a general slowdown in the economies of the Latin American region during the last two quarters, our Country Risk team remains optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.

The government is progressing with its plan to launch reverse auctions to secure electricity for the regulated market, with the goal of awarding long-term power purchase agreements (PPAs) to renewables generators by the end of March 2016. Clean energy certificates (CEL) will also be awarded in the March 2016 auction. Shorter-term PPAs for fossil fuel-fired generators will be awarder via subsequent auctions in 2017.

The Mexican government is considering developing two new nuclear reactors in the country over the next 15 years. Details on the value of the projects and whether foreign investment will be sought for their realisation has not been disclosed, but additional nuclear capacity is included in Mexico's National Electric System Development Programme (Prodesen) for the 2015-2029 period.

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