Lower Gas Prices Drive Profits Amid Market Shifts

In its quarterly financial report, CFE stated that the decline in gas prices has led to reduced operational expenses across its Mexican power plants, resulting in a strong performance in 2Q23. "Price fluctuations seen in fuel costs during 2022 due to the Russia-Ukraine conflict have stabilized in early 2023, resulting in decreased production expenses for gas-dependent power plants." 

CFE operates approximately 34GW of natural gas-fired power facilities and serves as Mexico's primary importer and distributor of natural gas via pipelines from the US. Wood Mackenzie data indicates that Mexico's import of US gas has maintained an average of 6.05Bcf/d year-to-date, reflecting a 155MMcf/d increase compared to the same period last year.

“During the first half of this year, the average cost of natural gas was US$2/GJ, a significant contrast to the same period in 2022 when the conflict in late February drove prices up to US$7-10/GJ." Notably, NGI’s Henry Hub Bidweek price averaged US$2.092/MMBtu in 2Q23, down from US$7.165 in the corresponding period last year. CFE attributed its positive financial performance in 2Q23 to the normalized conditions in the natural gas market that supplies the company and it anticipates stable fuel prices in the short to medium term, barring unexpected disruptions.

Reduced natural gas prices also led to a 14.5% decrease in CFE's operational costs during 2Q23 when compared to the same quarter in 2022. The company reported a 26.4% reduction in energy and fuel expenditures for the quarter, compared to the previous year, highlighting that the cost of natural gas consumed by the firm was 2.5 times lower on average than in the same period of 2022.

CFE's total revenues for the first half of the year surpassed MX$320 billion (US$18.75 billion), marking 7.7% growth against the January-June period in 2022. This increase was attributed to improved energy sales, mainly driven by a 4,697GWh rise in electricity demand in Mexico, particularly in the industrial, domestic and commercial sectors.

Diego Díaz Pérez, Researcher, IMCO, identified four factors contributing to the decline in global natural gas prices that have positively impacted CFE's revenues in 2023: diminished demand in Europe due to a mild winter, increased supply from the US, accumulation of natural gas reserves in Europe and the stabilization of prices following supply disruptions caused by the Russian-Ukrainian conflict.

Following the strong results of the second quarter, Manuel Bartlett, CEO, CFE, expressed confidence in the company's robust position to seize upcoming economic opportunities both in Mexico and the international arena. Bartlett emphasized CFE's readiness to address rising electricity demand, advancements in energy transition and the enhancement of Mexico's economic competitiveness. He stated that, "through an unprecedented advancement in the construction of generation plants within a single administration, CFE will contribute 52% of the country's energy generation by 2024."