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News Article

CFE Has Lost US$3.18 Billion So Far, Shows Resilience

By Cas Biekmann | Tue, 11/03/2020 - 10:03

Up until September of this year, Mexico’s state utility CFE has recoded losses of US$3.18 billion (MX$67.8 billion) of net profits. These figures, have been greatly influenced by the effects of COVID-19, and shows a stark contrast with the same period in 2019, when CFE recorded roughly US$104.3 million (MX$ 2.21billlion) in profits.

Manuel Bartlett head of the CFE, said losses occurred due to a lower energy demand brought on by a halt in economic activity during the pandemic. This meant a decrease of 9,351GWh for CFE, reported Energía a Debate.

“The loss due to exchange fluctuation has been unfavorable. This is because during the third quarter of the year, a depreciation of 17.1 percent of the peso had to be applied against the US dollar, going from 18.84 to 22.07 pesos per dollar,” said Bartlett.

Despite these negative figures, CFE sees recovery occurring via a major rebound in the past months: “It should be noted that at the end of the third quarter of 2020 an EBITDA of MX$144,861 million (US$6,855 million) was generated, a figure 59 percent higher than the same period of 2019,” the company reported. The total value of CFE’s assets grew by 6 percent compared to last year, with the company focusing on cash and derivative financial instruments to mitigate the exchange risk of debt it had contracted. Even though CFE’s equity dropped significantly in 2020, the state company has shown resilience in times of the pandemic.

Furthermore, Expansión reported that the subsidies the Ministry of Finance grants to CFE had increased by 51 percent during the pandemic. This rise is a direct result of the government’s promise to not force Mexican homes into a higher tariff structure, since many people have stayed indoors and use more electricity in order to enforce social distancing. CFE received MX$63 billion (US$2.9 billion) from the Ministry to cover the gaps in its earnings. “The decision was made, together with the Ministry of Finance, not to charge the increased use of household electricity and prevent it from going from the subsidized rate up to the high consumption rate. We have lost about MX$8 billion (US$376.3 million) due to this situation, so that all Mexicans could consume the electricity they needed during the pandemic” said Bartlett when he addressed the Chamber of Deputies

Bartlett adopted a combative tone when faced with criticism of CFE’s financial state, noting its importance as a public utility: “CFE is the largest company in the country. It is a powerful company, the best asset the country has. This continuous signaling that CFE is bankrupt, that it has an unstoppable debt, which is scrapped, that it is a mistake by the President to support its rescue as a national entity… This is a campaign, which has been going on for many years,” he said.

The data used in this article was sourced from:  
Energía a Debate, El Financiero, Expansión
Cas Biekmann Cas Biekmann Journalist and Industry Analyst