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News Article

CFE Gets More Resources from SHCP; Its Credit Rating Is Stable

By Cas Biekmann | Mon, 08/17/2020 - 08:54

El Financiero reported that Mexico’s Ministry of Finance increased its resources for CFE to subsidize electricity tariffs by 61 percent. Experts indicate that this step was taken due to the state utility’s drastic drop in sales caused by the pandemic.

In the first half of 2020, CFE recorded income coming from the federal government totaling MX$42 billion (US$1.9 billion) in its financial report. By comparison, CFE received MX$26.43 billion (US$1.2 billion) for the same period in 2019.

The state electricity production company traditionally receives subsidies from the government for its electricity rates. Being the state’s utility, CFE does not charge enough to its clients to cover its vast operating expenses to keep electricity accessible in Mexico. Demand for energy dropped significantly during the pandemic as a result of a lack of industrial activity, which increased demand in the domestic sphere.  

Specialists warn that the amount of resources the Ministry of Finance provides CFE could increment over the next few years, as long as the president maintains his promise of not raising electricity prices for Mexico’s population. It is important to note that the Ministry reserved MX$70 billion (US$3.2 billion) in subsidies for 2020. Sixty percent of this amount has already been spent. Last year, the Ministry reserved less resources to support CFE but ended up providing it with approximately MX$75 billion (US$3.4 billion).

In other news, Fitch Ratings restated its previous credit rating for CFE: BBB- with a stable outlook. Fitch argues that the pandemic has not drastically impacted the state utility and noted that it receives government support where it is needed. The credit rating is therefore tied directly to Mexico’s sovereign rating, “due to our perception of a very strong link between the two and powerful incentives from the government to support CFE,” Fitch wrote. The rating agency expects that CFE will be able to see through 2020 with a MX$70 billion (US$3.2 billion) budget. CFE retains its key strategic position in Mexico’s electricity market thanks to its 72.7 percent share of installed capacity, 75.5 percent share in net electricity generation and monopoly in transmission and distribution activities. Furthermore, CFE is the only electricity company supplying unqualified users.

The data used in this article was sourced from:  
El Financiero, Fitch Ratings
Cas Biekmann Cas Biekmann Journalist and Industry Analyst