Infra, reform to shrink Mexico power costs - CFE

Friday, August 8, 2014

Power generation costs in Mexico will start falling within two years once the effects of energy reform kick in and new infrastructure is commissioned, said state utility CFE's chief executive Enrique Ochoa.

The main challenge for generators is to switch from gas oil to natural gas, which is four times as cheap and less polluting, he told newspaper El Economista.

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"We expect to see concrete benefits in two years," Ochoa was quoted as saying.

In order to achieve that, Mexico needs to build gas pipelines and new co-generation power plants, he added.

Ochoa highlighted the reduction in electricity costs as one of the main benefits of the reform. Costs will also be partly driven down by reducing losses resulting from grid failures, he added.

He said that 80% of Mexico's electricity costs is linked to the price of the oil used in power generation and that 20% of the country's installed capacity is gas oil-fired.

Power grid problems, and theft, account for around 15% of CFE losses, he added.

CFE posted a 13.9bn-peso (US$1.06bn) net loss for the first half of the year compared with a 35.5bn-peso net loss for same-period last year.

Operating losses fell to 7.39bn pesos from 24.1bn pesos and Ebitda rose 68.6% to 26.5bn pesos, the firm said last month.

Under the reform CFE can use federal funds to begin investing in grid maintenance, El Economista quoted the president of the country's trade union chamber (Coparmex), Juan Pablo Castañón, as saying.

BNamericas will host its fourth LatAm Power Generation Summit in Santiago, Chile, on August 13-14. Click here to download the agenda.