CFE Reports Multimillion Dollar Losses in 2021
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CFE Reports Multimillion Dollar Losses in 2021

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María José Goytia By María José Goytia | Journalist and Industry Analyst - Wed, 03/02/2022 - 10:07

CFE lost MX$95.3 billion (US$4.68 billion) in 2021, according to its recently published financial results. The financial loss represented an increase of 10.9 percent compared to 2020, despite having increased its annual revenues by 12.5 percent. It is the second consecutive year the state utility closes with red numbers.

CFE’s net losses were slightly higher than those reported in 2020, when the state utility reported net losses of MX$78.91 billion (US$3.87 billion). CFE attributed these losses to the COVID-19 pandemic and the energy crisis caused by a winter storm in February 2021, which temporarily halted the much-needed imports of natural gas and caused major grid blackouts.

"The low temperatures and arctic winds caused by cold front 35 in the north and northeast of the country, as well as the freezing of pipelines and the closure of natural gas production plants in Texas led to deficient generation capacity in Mexican power plants," reads the quarterly report.

The freezing of natural gas and electric generation infrastructure in Texas caused natural gas prices to skyrocket from US$4.5 to US$150. Mexico produces 60 percent of its electricity from natural gas, most of it imported from the US. The country’s deep dependence on this imported gas impacted CFE’s finances heavily during cold front 35, as other alternatives for power generation such as fuel oil also involve high costs.

Furthermore, CFE's operating costs during 4Q21 stood at MX$585.3 billion (US$28.7 billion), which represented a 20.9 percent increase compared to 4Q20. However, according to the financial information sent to the Mexican Stock Exchange (BMV), the state-owned company recorded income of MX$565.6 billion (US$27.7 billion), which represented an increase of 12.5 percent compared to 2020, sparked by the recovery seen in 2021. "The effects of the country's economic recovery have led to an increase in electricity sales in the industrial, domestic and commercial sectors," said CFE.

In addition, 2021 transfers from the Ministry of Finance were equivalent to MX$70.2 billion (US$3.42 billion), a similar amount to those recorded in 2020, when the ministry transferred CFE MX$70 billion (US$3.41 billion).

The publication of CFE’s financial report for 2021 comes amid discussions regarding the energy reform proposed by President López Obrador, which aims to consolidate the position of CFE above that of private generators. The main critics of the bill highlight CFE's high electricity production costs, which make electricity more expensive. Meanwhile, private power production has more competitive prices due to lower operational costs, especially in the case of renewable energy. The results of the financial report may hinder support for the electricity bill that López Obrador requires. Mexico’s parliament will vote on the bill in April.

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