CFE Creates Trust to Boost its BusinessBy Cas Biekmann | Fri, 07/24/2020 - 09:26
July 22, CFE approved its ‘Master Investment Trust’. With it, the state production company seeks to construct five strategic power plants to guarantee stability and quality energy generation for Mexico, according to a report by Energía Hoy. In addition to constructing these new plants, CFE also aims to acquire existing facilities. The funds of the trust have not yet been disclosed.
In a remote meeting with CFE’s board of directors, the plan was outlined and supported by Minister of Energy Rocio Nahle and Head of CFE Manuel Bartlett. During the meeting, the board approved CFE’s 2021 budget. “In these new times, the energy sector needs to work with agility. We asserted that the trust in practice guarantees strengthening of CFE,” Nahle said. Bartlett lauded the trust as an original instrument, allowing CFE a strong degree of financial independence. One major blessing of the trust is that it allows CFE to invest without impacting the Mexican government’s debt ceiling.
Miguel Reyes, CEO of CFE’s energy generating arm, presented the trust to the board. With the trust, Reyes argued, CFE would be able to reoccupy its position as a power producing company. This will be done by expanding CFE’s portfolio by developing new projects and acquiring strategically placed power plants. With the trust paving the way, the commission aims to control 54 percent of Mexico’s power production by 2024.
During the meeting, the board approved José Manuel Mendoza as Deputy Director of Unregulated Business. Carlos Meléndez was appointed as Corporate Director of Strategic Planning.
According to Energía Hoy, CFE would need to shift to higher gears to achieve the 54 percent goal, as legacy contracts possess 17 percent of the energy generated. Currently, CFE owns 82 power plants that generate between 170 to 180MW per hour on average, with a cost of around MX$1,435/MWh (US$63.8/MWh). Indpendent power producers collectively own 34 plants. They generate between 370 to 380MW per hour on average, costing around MX$970/MWh (US$43.2MW/h). To achieve its goal, CFE must increase generation capacity from 14GWh to 18GWh.
The construction of several combined cycle power plants CFE reported earlier this week will be important in achieving that goal, as they could enhance capacity by up to 3GWh. Investments are significant - around US$3 billion to US$3.5 billion.
The capacity not covered can therefore be purchased from private parties. It is important to note that CFE will have nothing to do with the concept of expropriation and therefore stresses it will purchase any of the combined cycle power plants it is eyeing after a third-party appraisal. Energía Hoy sees the steps CFE is taking, along with minor policy changes to make them possible, as a sign that Mexico’s market is maturing and becoming more open for business.