16th annual mexican energy conference nov, 13-14 2012 · 16th annual mexican energy conference nov,...
TRANSCRIPT
16th Annual Mexican Energy
Conference Nov, 13-14 2012
Alfredo Santillan
Representative
SMBC - Mexico Representative Office
“Electric Power Supply and
Generation in Mexico”
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Industry Overview:
The Mexican electricity market is the exclusive responsibility of Comisión
Federal de Electricidad (“CFE”), which is wholly-owned by the Federal
Government.
CFE is a vertically-integrated electric utility and also the largest electric utility
in Latin America.
Its budget and borrowing program is included in the Mexican Government
Budget and approved by the Mexican Congress.
CFE (BBB/BAA1/Stable) has the responsibility for the strategic development,
construction, operation and maintenance of the country’s electricity system.
In 1992, there were some modifications to the Mexican Electricity Law to
allow private investment in the industry: Mainly through Self-Supply/Co-
generation & Independent Power Producers (“IPPs”).
IPP program Allows private companies to build and operate power plants
in Mexico, but limit their sale of power to CFE under long-term contracts.
Electricity Industry
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Industry Overview:
CFE accounts for nearly 77% of Mexico’s total installed capacity and
electricity production.
Total installed generation capacity in 2010 was 52.9 GW (41 GW and 11.9
GW of independent power producer capacity).
CFE operates Mexico’s national transmission grid and its sub-transmission
and distribution network covers 833,081 km.
Market Demand:
The electricity market consists of the sale of electricity to industrial,
commercial, residential, transportation and other end-users including
agricultural sector.
Demand growth in the power sector is a reflection of population expansion,
increased economic activity and changing energy intensity/efficiency.
In the next 15 years Mexican estimated consumption of electricity will
increase at an average annual rate of 3.5%.
Market Supply
Mexico’s electricty generation is dominated by natural gas, oil, hydro and
coal which make up roughly 39%, 24%, 10% and 22% of the installed
capacity, respectively.
CFE’s plans to increase its installed capacity by 37.7 GW between 2012 –
2026. This represents a 71% increase over current capacity.
The power sector in Mexico is an important element and a key factor for the
The Mexican constitution states that generation, transmission, distribution
and supply of electricity are the exclusive responsibility of the Federal
Government. By law, CFE is entrusted with the overall planning,
development and operation of the national electricity system.
There used to be another company called Luz y Fuerza Centro (“LFC),
which was in charge of planning and providing electricity to Mexico City and
surrounding areas, but was dissolved by Presidential Decree on October 11,
2009. Operations and activities formerly performed by LFC have been
undertaken by CFE since the date of the mentioned dissolution.
The exception to the above is the power generated under the independent
power producer (“IPP”) program.
Generation:
Of this capacity, as the figures below show, 46% is capacity provided by
thermoelectric plants, 23% is provided by independent generators (IPP),
22% is generated by hydroelectric plants and the remaining 9% is distributed
among coal, nuclear and others. The system’s high reliance on thermal
generation exposes it to the supply of fuels.
Electricity Industry
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Market Supply/Generation
Mexico’s electricity generation is dominated by natural gas, oil, hydro and
coal which make up roughly 39%, 24%, 10% and 22% of the installed
capacity, respectively.
Of this capacity, as the figures below show, 46% is capacity provided by
thermoelectric plants, 23% is provided by IPPs, 22% is generated by
hydroelectric plants and the remaining 9% is distributed among coal, nuclear
and others. The system’s high reliance on thermal generation exposes
it to the supply of fuels.
Installed capacity by type (aug-2010)
Hydro, 22%
Nuclear, 3% Eolic, 0%
Geothermal,
2%
Thermal,
46%
Coal, 5%
IPP, 23%
Electricity Industry
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4
Overview of the Mexican Wind Power Market (Continued)
Independent Power Producers (IPPs):
With the opening of Norte Durango with a Net Capacity of 450 MW, the IPP’s generation capacity increased to 11.9GW
PRIVATE & CONFIDENTIAL
Electricity Industry
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Main regulatory entities in the Mexican Energy Industry:
Energy Regulatory Commission (CRE): Is in charge of elaborating
clear rules for independent power production, sales and reserve
purchase contracts between private generators and the public utilities,
wheeling charges, and overseeing the power generation and natural gas
concessions being awarded.
Ministry of Energy (SENER): In charge of conducting energy policies
with the aim of guaranteeing a competitive, efficient, high-quality,
economically viable and environmentally sustainable energy supply.
Federal Electricity Commission (CFE): Is a decentralized, vertically
integrated electric energy service company wholly owned by the Mexican
federal government. CFE is in charge of generation, transmission,
transformation, distribution and commercialization of electricity for all of
Mexico.
Main Players (Independent Power Producers)
Iberdrola
4,239 MW
Mitsui
2,510 MW
Gas Natural
1,941 MW
Mitsubishi
990 MW
Intergen
754 MW
AES
484 MW
Note: The following Japanese companies are minority partners in some power plants: Kyushu, Chubu, Tokyo Gas and Tohoku.
Main Players
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Main Players
EPC Contract participants (last 5 years)
EPC Contractor Project Fuel
KepCo / Samsung
C&T / Techint
•Norte II (433MW) •Gas Combined Cycle
Iberinco •Phase I - Salamanca
(430MW)
•Cogeneration
Abengoa / Abener •Nuevo Pemex (300MW) •Cogeneration
Iberdrola •Laguna Verde (1,365MW) •Nuclear
Mitsubishi •Carboeléctrica del Pacífico
(651MW)
•Coal
ICA •La Yesca (750MW) •Hydro
Cobra •Oaxaca I (102MW) •Eolic
Acciona •Oaxaca II, III and IV (102
MW each)
•Eolic
Mitsui / Samsung /
Kogas / TOA
•Manzanillo LNG •LNG
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In the next 15 years (2012-2026), CFE plans to increase its installed
capacity by 37.7 GW.
This represents a % = 71% increase over current capacity.
Capital investment of MXP$ 1,264 millions (US$ 97.2 bn).
The private sector represents a key player in the future investments for
the Sector IPPs & OPF.
Investments/Outlook
Transmission
18%
Distribution
23%
Generation
58%
Maintenance
1%
OPF
30%
CFE's Budget
40%
IPP
30%
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Additional Capacity Requirements 2012 – 2019 period:
Investments/Outlook
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In order to achieve the projected additional capacity, CFE is promoting an
integrated approach.
Including the development of a new natural gas supply system. There is a
significant focus on natural gas due to:
Increasing price differentials between natural gas and fuel oil.
Expected supply restrictions of fuel oil in the mid and long terms, planned
by SENER.
Pipeline system in Mexico
SENER together with Pemex, CFE and CRE have launched a strategy to
improve the gas pipeline in Mexico.
Multiple large-scale projects to expand Mexico’s gas pipeline network have
been announced, most to be developed by private investors.
Over US$10 Bn in new investment in the gas pipeline system is anticipated
over the next 5-10 years.
Expansion Project / Supply Challenges
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Pipeline system in Mexico
Additional investment in the next 2 years alone is approx. US$7,897 MM (a
51% increase over existing investment as of 2010) and will add 4,374 Km
(38% more than in 2012).
The strategy intends to increase the national natural gas coverage to 81% of
the States in Mexico.
Expansion Project / Supply Challenges
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Mexican Gas Market
The shale gas revolution in the U.S., based on the exploitation of hydro-
fracking and horizontal drilling, has led to a significant increase in the overall
supply of gas production and reserves in the US and Canada.
The U.S. is expected to become a significant net exporter of natural gas.
Mexico is a traditional market for U.S. gas.
The dramatic increase in production and reserves in the US has resulted in a
sharp downward movement in natural gas prices for the North America
region.
The price differential between gas delivered at Reynosa, on the US-Mexican
border, with a common European gas index, Italy PSV, now stands at
US$9.25.
The case for increasing gas imports from the U.S. has become very strong.
Expansion Project / Supply Challenges
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Independent Power Producers (IPPs). Public Works Contracts (OPF)
• Scheme utilized in generation projects,
excluding hydroelectric plants.
• Normally used in transmission lines,
substations, hydroelectric plants, re-
vamping, etc.
• Projects awarded through international
tenders Most competitive KW/h.
• Projects awarded through international
tenders Most competitive turn-key
price.
• Companies are responsible for the
financing during construction.
• Companies are responsible for the
financing during construction.
• CFE signs a power purchase
agreement (25 years) At COD.
• “Turnkey” projects allow CFE to
operate the plants at COD.
• The company remains as the owner of
the assets and operates the facilities
Acquisition option by CFE.
• Upon completion, assets (and all
operational risks) are transferred to
CFE Companies get the total
contract value paid.
Main Schemes for Private Investment
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How to Structure a Bankable Project
Equipment
& Technology
Providers
Offtakers
and/or
Marketers
Utility
Providers
Feedstock
Supplier
(i.e. PEMEX)
EPC
Contractor
Project
Key Elements for a Successful Financing
Experienced EPC Contractor
Proven Technology
Lump Sum Turn Key approach is
preferred
Adequate liquidated damages
Clear strategy to sell the Project’s output
(offtakers and marketers)
Reliable suppliers
Experienced operator
Environmental and social risks properly
mitigated – Equator Principles Construction phase Operating phase