energy alert - national electric system development ... · 1 investment resume 2016 - 2030 5 3...

Energy Alert - National Electric System Development Program (PRODESEN) 2016 - 2030

June, 2016 PRODESEN

Table of Contents

Power Generation2 9

What you will find in this EY Energy Alert:

Investment Resume 2016 - 20301 5

Expansion and Modernization Program for the National Transmission Network3 13

Expansion and Modernization Program for the General Distribution Networks4 19

Energy Uptake and Demand5 20

Locational Marginal Prices (LMPs)6 26

Other EY Insights and Conclusions7 29

EY Professionals8 31

June, 2016 PRODESEN

Executive Summary

► The SENER published a program named PRODESEN containing planning and importantelements of the national electricity system. PRODESEN details the investment that must bemade to develop and modernize the network of the national electricity system, includingbudgets and consumption statistics for the years 2016 through 2032.

► The program contains details about the capacity of power generation and the types of technologies or energy used to produce and satisfy demand for energy at the national level for the years 2016 through 2032.

► According PRODESEN, during 2015 CFE provided electric service to 39.6 million customers,of which about 90% are classified as residential and commercial, while 58% of total sales areconcentrated in the industrial sector.

June, 2016 PRODESEN

Abbreviation English Spanish

PRODESEN National Electric System Development Program Programa de Desarrollo del Sistema Eléctrico Nacional

RGD General Distribution Network Red General de Distribución

RNT National Transmission Network Red Nacional Transmisión

CFE Federal Electricity Commission Comisión Federal de Electricidad

SENER Secretary of Energy Secretaria de Energía

SEN National Electric System Servicio Eléctrico Nacional

SIN National Interconnected System Sistema Interconectado Nacional

FIRCO Shared Risk Trust Fideicomiso de Riesgo Compartido

LIE Electric Industry Law Ley de la Industria Eléctrica

CRE Energy Regulatory Commission Comisión Reguladora de Energía

CENACE National Energy Control Center Centro Nacional de Control de Energía

PIIRCEIndicative Program for the installation and retirement of Electric

Generation FacilitiesPrograma Indicativo para la Instalación y Retiro de Centrales Eléctricas

PIB Gross Domestic Product Producto Interno Bruto

CENEGAS National Control Center for Natural Gas Centro Nacional de Control de Gas Natural

PEF Expenditure Budget of the Federation Presupuesto de Egresos de la Federación

LMP Locational Marginal Price Precio Marginal Local

Abbreviations

PRODESEN estimates 120 million USD investment over the next 15 years for power related infrastructure projects

► 75% corresponds to generation projects, 12% to

transmission projects, and 13% to distribution

projects.

June, 2016

*Considering 18.8 MxN as the FX rate

Generation

Transmission

Distribution

Estimated Investment For Electric Sector

119,431 million USD

Transmission

13,851

Generation

89,552

Distribution

16,028

Source: PRODESEN

PRODESEN

June, 2016 PRODESEN

Generation• PRODESEN estimates around 42 billion USD for the installation of new generation plants within the first 5 years

• 79% of the investment in PIIRCE projects is aimed towards clean energy projects

Transmission• 71% of the estimated investment is aimed towards projects that expand the transmission network and increase voltage and

compensation support, while the remaining investment is aimed at modernizing the RNT

• The RNT investment will be spread across 54% for transmission lines, 42% in transformation works and 4% in compensation projects

• 54% of the RNT investment is directed towards transmission lines; with the remaining 46% directed forwards voltage and compensation support

Distribution• 82% of the estimated investment is aimed at projects that will expand in modernize the distribution network

• 16% is aimed towards public works projects

• The remaining 2% is aimed towards investments in operating equipment

Most of the investments across the value chain are aimed at developing, extending or modernizing the entire electricity network


Estimated Investment Evolution By Concept 2016-2030 in Million USD

June, 2016 PRODESEN

ESTIMATED INVESTMENT BY CATEGORY 2016-2030

(Million USD)

Concept 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030TOTAL

2016-2030

Generation 8,294 6,895 9,211 10,137 7,435 2,343 2,379 3,166 4,425 5,453 4,841 4,681 6,900 6,526 6,865 89,553

Transmission1/ 917 1,804 1,219 933 1,308 636 723 1,215 913 910 859 701 536 499 679 13,851

Distribution 1,630 1,870 1,565 1,087 853 746 865 1,002 956 888 757 873 1,027 986 924 16,028

Total 10,841 10,569 11,994 12,157 9,595 3,724 3,968 5,383 6,294 7,250 6,458 6,255 8,464 8,011 8,467 119,431

1/Includes Expansion and Modernization

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

0

50,000

100,000

150,000

200,000

250,000

Distribution

Transmission

Generation

Source: Elaborated by EY with PRODESEN information.

Mill

ion

US

D


In 2015, CFE generated 309,553 GWh = 2.7% more vs 2014

79.7% conventional technologies

20.3% clean technologies

Electricity generation from conventional technologiesincreased by 4.4% in 2015 compared to 2014, due to a 3.8%increase in energy output from combined cycle plants, and a5.4% increase in output from conventional power plants

The generation of electricity from clean sources recorded areduction of 3.7%. This was mainly due to a 20.6% decrease inhydroelectric output in 2015 (as compared to 2014).

June, 2016 PRODESEN

Power Generation by modality

55.2% CFEs’ power plants

28.8% Independent Production

16.0% Others

Fact

Considering the generation and total electricity sales by state in 2015, it is observed thatthe power demand in the central region of the country is greater than the energyproduced in the same area.

Power Generation - Facts

Source: PRODESEN

50%

13%

11%

4%

2%

10%

4%

3%

2%

1%

Electric Power Generation by type of Technology for 2015

Combined Cycle

Conventional Thermal

Coal & Oil

TurboGas

Internal Combustion

Hydroelectric

Nuclear

Wind Power

Geothermal

Bioenergy & Cogeneration

June, 2016 PRODESEN

Tamaulipas, Veracruz, Coahuila, Guerrero and Baja California

43.4%

Aguascalientes, Morelos, Quintana

Roo, Zacatecas and Tlaxcala

0.3%

Others

56.4%

Northeast, East and West Control regions

67.6%

North, Central, Northwest and

Peninsular regions

25.1%

Baja California, Baja California Sur and

Mulegé

7.3%

Regions

States

Electric Energy Balance by State 2015

Energy Balance Mapping in 2015

0.00

0.18

0.16

0.13

1.75

0.67

1.231.44

2.53

-0.20

1.71

-0.20

4.82

5.69

1.97

1.68

2.28

-0.24

0.40

-0.95

-0.47

-0.80

-0.99

-0.67

-0.46

-0.47

-0.40-0.98

-0.92

-1.0

-0.26

-1.0

As per the PRODESEN analysis, in the year 2015 it was shown that the Northeast, East and West Control regions produced more than 60% of the total generation of electricity in

Mexico. Also, the main states in production of energy are Tamaulipas, Veracruz, Coahuila, Guerrero and Baja California. The remaining regions (Baja California, Baja California

Sur and Mulegé ) as well as the States of Aguascalientes, Morelos, Quintana Roo, Zacatecas and Tlaxcala produced less than the 10% of the Energy production.

Source: PRODESEN

78.3%

79.7%

21.7%

20.3%

0.0% 50.0% 100.0%

2014

2015

Clean Conventional

GROSS GENERATION BY SOURCE 2015

(Gigawatt-hour)

ModalityTotal Generation1/

(GWh)

Participation

(%)

Sources according to LSPEE2/

CFE 316 0.1

Independent production 89,157 28.8

Self-supply 23,983 7.8

Small production 153 0.0

Cogeneration 15,920 5.1

Export 7,157 2.3

Continuous own uses 1,036 0.3

Sources according to LIE3/

CFE - Generator 170,662 55.1

Generator4/ 1,006 0.3

Other

FIRCO and GD5/ 161 0.1

Total 6/ 309,553 1001/ Capacity interconnection contract with CENACE. 2 / Electricity Act Public Service Electric Power. 3 / Electricity

Industry Act. 4 / Includes plants in operation with permits granted or pending in 2016. 5 / Shared Risk Trust

(FIRCO) and Distributed Generation (DG). 6 / Totals may not add due to rounding. Preliminary information at the

end of 2015.

Source: Developed by SENER with data from CFE, CRE and Undersecretary of Planning and Energy Transition.

POWER GENERATION BREAKDOWN

June, 2016 PRODESEN

Gross Generation

• LSPEE (Law Of The Public Service Electric Power)

• Self-supply permitApplicable

legislation

Obligations

• Postage stamp (MXN/kWh) (if renewable energy is used);Transmission

costs

• LIE (Law of Electricity Industry)

• Generator permit

• Consumption and demand reported on a monthly basis

• Warranties for Market participation, for FTR and over the

Aggregate Estimated Responsibility (the limited maximum of

exposure-consumption under the wholesale market rules)

• FTR (Financial Transmission Rights) – depending on which

nodes the energy is produced and received

• Regulated Tariffs for T&D

Self-supply Bilateral Contracts

• The final users are shareholders of the generator permit holder

entity; there is a cost for the share. Shareholding

• The Offtaker may only be part of the generator permit holder entity if

the modification of the permit is granted by the CRE; this also applies

if more capacity is needed.

• The PPA will be limited by the term of the permit depending on the

year the permit was granted (may have indefinite term or be subject to

the interconnection agreement term)

Stakeholders

• Not necessary

• UCPM (Market participant qualified user) with a threshold of 20

GWh of annual consumption and 5 MW of demand

Sources: http://www.cre.gob.mx/documento/1913.pdf; Law of the Electric Industry (LIE); Law Of The Public Service Electric Power (LSPEE); Electricity Market Rules; LAERFTE

• Self-supply capacity

• Energy bank (if renewable energy is used)

• Net metering

Instruments /

products

• Capacity Balancing Market - obligation

• CELs trade - benefit

• Ancillary Services - obligation

• Only applies to permits filed before August 2014;

• Contractual warranty (ex. bond or corporate warranty)

June, 2016

EY analysis on the main differences between Self-supply and Bilateral Contracts in Mexico

PRODESEN

http://www.cre.gob.mx/documento/1913.pdf

June, 2016 PRODESEN

Contracting structures Description Advantages Disadvantages Market examples

1) Bilateral PPA

► Client contracts to purchase power from

generator

► Either through back-to-back PPAs or

through a CfD contract

► Potential for price security and long-term cost

reductions

► No upfront capex required

► Supplier responsible for balancing supply

► Retain ‘green’ attributes of specific asset(s)

► Suitable when power

demand is required for

continuous operations

► No participation in equity

returns on investment

► Tarmac

► M&S

► Sainsburys

► Weipa solar PV

2)Equity investment

with PPA

► Client invests in offsite renewable

electricity asset and also retains some or

all of the power offtake.

► Equity investment may be minority, majority, or

100% influencing the degree of control over PPA

terms

► Increasingly used by large corporates




► IKEA

► Google

3) Equity investment

without PPA

► Client invests in a renewable asset. PPA

contracting is between the project and a

3rd party

► Price Security achieved via ‘natural hedge’

between power price and equity dividends

► Flexible to determine extent of involvement in

development process

► Equity returns determined

by ability to secure

competitive PPA pricing (or

take merchant risk)

► VW/Audi

► Colruyt

► Google

4) DBFO (consider

equity)

► Enter into agreement with a developer to

build generation capacity on or near site

► Developer remains responsible for

design, build, financing and operation of

facility, or client could retain control or

establish JV

► This option outsources key risks to parties with

core competence

► Flexible to determine extent of involvement in

development process

► Client undertakes project facilitation work, and

transfers risk to contractors where it does not

want to retain that risk

► Client takes on more

project development,

construction and

operations risk, but can

adjust to meet the desired

risk profile

► Ineos Chlor

► Tulus Russel

► RWE Cogen

5) PPA competitive

procurement

► Client runs a competitive process to

procure multiple projects, setting a price

cap for the PPA

► Developers bid back the power price and

are awarded the PPA based on this price

and financial / technical deliverability

► Developers provide the site and remain

responsible for design, build, financing and

operation of facility

► Facilitates large scale capacity procurement, but

multitude of regulatory environments would

necessitate multiple procurements




► No participation in equity

returns on investment

► US Army Corps

of Engineers

► South Africa

► ACT

Government

The Wholesale Electricity Market permits multiple approaches structuring bilateral contracts

The Expansion and Modernization Program of the RNT aims for minimizing the costs of providing electric service,

reducing costs of congestion, encouraging efficient expansion of generation, and promoting, reliability, continuity and

network security. According to the above, the Extension and Modernization Program of the RNT has three primary design

objectives.

What is intended?

Interconnect the National

Interconnected System (SIN) with isolated systems of

the Peninsula of Baja California

1Interconnect the RNT with North

America and Central America

2Satisfy the nations

growing demand for electricity

3

OBJECTIVES

June, 2016 PRODESEN

Transmission Lines

Classification of Projects

• Projects that are fully evaluated and identified in the planning process, which are ready for construction. New requirements for bidding and construction stage are also included.

Scheduled Projects

• Projects and works that are identified in the planning process, which are under evaluation and study. Such projects must be deemed to have a net benefit to the SEN in order to be included in later editions of PRODESEN.

Projects under Study

• Project proposals will be subject to evaluation and planning studies in order to identify the benefits for SEN and the work necessary for execution. Projects will have to meet the net benefits test desirable above.

Projects under consideration

June, 2016 PRODESEN

Transmission Lines

June, 2016 PRODESEN

Objective 1: Interconnect the National Interconnected System (SIN) with isolated systems of the Peninsula of Baja California

• Interconnection of Baja California to the National Interconnected System (SIN)Scheduled Projects

• Interconnection of Baja California Sur and Mulegé to the SINProjects Under Study

Objective 2: Interconnect the RNT with North America and Central America

• Back to Back asynchronous link 150 MW in Nogales, Sonora - Arizona, USA

• HVDC Transmission between Isthmus of Tehuantepec and Mexico ValleyScheduled Projects

Transmission Lines - Projects per Objective

June, 2016 PRODESEN

Objective 3: Addressing the needs of supply and demand of electricity.

• Interconnection of Baja California to the National Interconnected System (SIN)

• Transmission Network for the Development of Wind Energy Resources in Tamaulipas

• Chichi Suarez Bank 1

• Potrerillos Bank 4

• Industrial Guadalajara

• La Laguna area

• Lake substation

• Complementary Works 2016-2030

Scheduled Projects

• Dos Bocas Bank 7

• Battery bank to integrate additional 10 MW in order to increase the capacityto generate renewable energy in Baja California Sur 90 MW

Projects Under Study


Projects under Analysis

June, 2016 PRODESEN

Increase voltage on transmission line Nacozari

– Moctezuma

Review of transmission interconnections between Mexico – North America

and Mexico-Central America and to strengthen transmission infrastructure

to foster integration of electricity markets and

increased reliability

Analysis to continue or increase power grid

applications

Design of the transmission network to provide

integration of renewable generation in high potential

areas

Transmission network Chihuahua City to La

Laguna

Increase voltage of facilities serving the city of

Tijuana

Design of transmission and distribution network of

major cities with high load density and tourism areas

HVDC transmission line on northern border to interconnect the

transmission between countries and deepen the integration of trade with

America


Transmission and distribution are considered strategic areas and are reserved for the Mexican Government. The RNT is grouped by 53 transmission

regions, of which 45 of them are interconnected between a total of 62 individual connections in SIN. The 8 remaining transmission regions belong to

isolated programs of Peninsula de Baja California, of which 7 are interconnected with a total of 6 individual connections.

53

Transmission Regions

45Interconnected between them

62Connections in

SIN

8Isolated

Programs

7Interconnected between them

June, 2016 PRODESEN


Source: PRODESEN

Objectives

General Objective

Supply power to every end-user, with quality and at competitive prices, and promote greater efficiency of electric service with a high degree of safety andreliability.

•Project

•Formalizing power supply in settlements

• Install connections and acquire new meters

• Interconnect Holbox Island to SEN

Action Line 1:Expand coverage

•Project

•Strengthening actions aimed at reducing energy losses

•Ensure the reliability of the RGD

•Modernizing measurement systems, billing and collection

Action Line 2: Extendthe RGD

•Project

• Install smart meters (AMI) and replace obsolete equipment

•Strengthen actions to reduce technical losses at the distribution level

Action Line 3:Reduce power losses

in distribution

Incorporate Vanguard Technology Systems3

Meet the existing supply and demand for electricity distribution1

Extend distribution service2• Projects

• Feasibility study to assess solar Urban Farms

• Promote rural electrification

Action Line 1: Foster Distributed Generation

• Projects

• Integrate small grids

• Integrating Advanced Metering Infrastructure (AMI)

• Install SCADA technology and equipment.

• Install switching and protection equipment (EPROSEC per its acronym in Spanish)

Action Line 1: Implement systems with technology

that contribute to the development of smart grids

(REI)

Expansion and Modernization Program RGD

June, 2016 PRODESEN

June, 2016 PRODESEN

In 2015 the electric energy consumption was288,232 GWh, 2.9% higher than the previousyear.

94.6% of Mexico’s consumption isconcentrated within the SIN, with 75%occurring in 4 control areas (Western,Central, Northeast and East).

The power consumption exhibits seasonaltrends. Between April and September 54% ofannual consumption is recorded, with theremaining 46% occurring in winter.

Source: PRODESEN

All projects contemplate steady growth in the demand for electric energy

Current trends on consumption and demand for electric energy by control zone

June, 2016 PRODESEN

Control Zones for the electrical energy Consumption (Gigawatt per hour)

Control Zones Consumption 2014 Consumption 2015 AGR (%)1 Maximum Demand

Central 53,228 53,649 0.8 6,932

Oriental 44,901 46,587 3.8 7,985

Western 63,540 65,220 2.6 4,144

Northwest 21,089 21,642 2.6 3,936

North 23,150 23,734 2.5 9,151

Northeast 48,559 50,114 3.2 6,082

Peninsular 10,635 11,617 9.2 1,611

SIN - Total 265,102 272,564 2.8 39,840

Baja California 12,598 13,122 4.2 2,374

Baja California Sur 2,460 2,546 3.5 435

SEN - Total 280,160 288,232 2.9 42,649

1 Annual Growth Rate

Source: EY with CENACE data

June, 2016 PRODESEN


Demand

Demand On January 1, 2015 at 9:00 pm, the minimum level of demand was observed in the SIN at a level of 18,341 MWh/h.

Instead, the August 14, 2015, at 17:00 hours, with a recorded level of 39,840 MWh/h.

Maximum Coincident

Demand

In 2015, the maximum coincident demand SIN recorded was on August 14th, at 17:00 at a level of 39,840 MWh/h. If

we include the highest demand of Baja California and Baja California Sur at the same time and day of the year,

coincident peak demand was 42,649 MWh/h.

Maximum Integrated

Demand

In the summer, the highest levels of demand are recorded in nine regions mainly during high temperatures, when the

use of air conditioners is maximized.

In the Central region reaches its peak demand during the winter season primarily driven by increase use of lighting

systems.

Maximum Immediate

Demand from SIN

In August 2015, the maximum instantaneous demand stood at 40,710 MW. In planning studies carried out by the

CENACE, the maximum immediate demand, which is the power that must be supplied in an instant moment; a higher

power to meet high demand conditions integrated by the SIN.

Current trends on consumption and the demand of electric energy

June, 2016 PRODESEN

AVERAGE ANNUAL GROWTH OF THE MAXIMUM INTEGRATED DEMAND BY CONTROL ZONE

► Based on planning scenarios, electricity consumption from the SEN projects is estimated to grow by an

average of 3.4% between 2016 and 2030.

► Based in the estimates from planning scenarios, the maximum demand of SIN is expected to increase an

average by of 3.7% between 2016 and 2030.

NORESTE

4.2%

BCS

5.3%

BC

3.6%

OCCIDENTAL

3.7%CENTRAL

3.1%

ORIENTAL

3.6%

PENINSULAR

4.1%

NORTE

3.3%

NOROESTE

4.7%

Forecast of uptake and power demand

Source: PRODESEN

► The CENACE analyzes the effects on seasons and diversity of the power demand at different operational points. The

network study will define the RNT planning associated with infrastructure upgrades and network reinforcement to

facilitate stronger interconnections between the central power stations and the load centrals.

June, 2016 PRODESEN

CENACE projects the following scenarios

based on the historical behavior registered of the

power demand and the operations in the

Control Regions.

The highest demand in the

year is registered in the regions of Northeast, North, Baja Califorina, Baja CaliforinaSur y Mulgé.

The highest nocturnal

demand occurs during June and

August in the Northwest, North

and Northeast regions.

The highest demand of the

year is registered in the Central Control

Region.

There is a slowdown

registered in the demand of the northern

regions.

SIN registers the minimum

demand of the year.

Highest demand in Summer (17:00 hrs.)

Highest Nocturnal demand in Summer (22:00 hrs.)

Minimum demand in Winter (04:00 hrs.)

Medium demand in Winter (15:00 hrs.)

Highest demand during winter (20:00 hrs.)

Growth Expectations: Peak Demand by Seasons

June, 2016 PRODESEN

PEAK DEMAND FORECAST FORMED OF SIN BY SCENARIOS

(Megawatt-hour/hour)

Year Low AGR1/ 2 Medium TCA1/ High AGR1/

2014 39,000 --- 39,000 --- 39,000 ---

2015 39,840 2.2 39,840 2.2 39,840 2.2

2016 41,318 3.7 41,420 4.0 41,739 4.8

2017 42,730 3.4 43,017 3.9 43,638 4.5

2018 44,005 3.0 44,629 3.7 45,587 4.5

2019 45,295 2.9 46,315 3.8 47,634 4.5

2020 46,637 3.0 48,037 3.7 49,745 4.4

2021 48,084 3.1 49,780 3.6 51,949 4.4

2022 49,531 3.0 51,569 3.6 54,212 4.4

2023 51,023 3.0 53,432 3.6 56,583 4.4

2024 52,540 3.0 55,348 3.6 59,025 4.3

2025 54,179 3.1 57,409 3.7 61,655 4.5

2026 55,844 3.1 59,527 3.7 64,376 4.4

2027 57,570 3.1 61,725 3.7 67,203 4.4

2028 59,299 3.0 63,961 3.6 70,127 4.4

2029 61,147 3.1 66,340 3.7 73,251 4.5

2030 63,041 3.1 68,792 3.7 76,522 4.5

AAGR2/

2016-20303.1 3.7 4.4

1/ AGR: Annual Growth Rate 2 / AAGR: Average Annual Growth Rate (relative to 2015).

Source: Developed by SENER with CENACE data.

Growth Expectations: Peak Demand by Seasons

MEC : Marginal Energy Component

► Represents optimal dispatch

► Same price for every node, calculated both in day ahead and real

time

► In a competitive market, all dispatched power plants will receive the

clearing price of power ignoring congestion and losses

MCC : Marginal Congestion Component

► Represents price of congestion for binding constraints

► Will be zero if no constraints

► Will vary by location if system is constrained

MLC : Marginal Loss Component

► Represents price of marginal losses

• Calculated using penalty factors

• Will vary by location

► Calculated both in day-ahead and real-time

Sensitivity analysis for the MEC

► Sensitivities can be taken to the key variables of:

► Demand

► Natural gas prices

► Renewable energy uptake

LMP = MEC + MCC + MLC

Approach to forecasting Locational Marginal Prices (LMPs) in Mexico

June, 2016 PRODESEN


June, 2016 PRODESEN

Annual Average LMPs 2016-2030 vs 2015-2029

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

PMLs Annual Average2016-2030

57.14 54.01 49.90 43.78 44.31 45.45 48.51 49.20 47.72 50.59 51.14 49.70 49.81 50.34 50.25 50.03 50.11

PMLs Annual Average2015-2020

50.72 52.17 49.84 47.48 40.03 40.25

0

10

20

30

40

50

60

70

US

D p

er

MW

h

June, 2016 PRODESEN

Average LMPs by RegionU

SD

per

MW

h


35

45

55

65

75

85

Average by Region

Main features of CELs

% of obligation SENER establishes annual requirements to use a

percentage of clean energy in the load centers (which

doesn´t consider the clean energy generated from the

Legacy Interconnection Contracts):

• In 2018, the obligation is 5%

• In 2019 , the obligation is 5.8%

Potential price An estimate: $ 10 - 22 USD

Sanctions / fines Penalty of six to fifty minimal salaries; a sanction

equivalent to twice will be applied to persistent

offenders. The sanctions do not release Final User of

the obligation of paying the electric energy consumed

improperly.

Energy Transition Law Establishes the goals for the percentage of clean energy

out of the total electricity consumption; for 2018 the rate

is 25%, which increases to 30% in 2021, and 35% in

2024.

Sources:

Law of the Electric Industry; Energy Transition Law

Under LSPEE – Self-

supply:

Stamp portage2010 20161 Unit

High voltage 1.80 2.22 USD/MWh

Medium voltage 1.80 2.22 USD/MWh

Low voltage 3.61 4.44 USD/MWh

1Banxico, period: Jun 2010 – April 2016;

Sources :http://www.cre.gob.mx/documento/1913.pdf

FX rate: Banxico, May 19th, 2016

Under LIE – Bilateral

contract:2016 Unit

Transmission tariff regulated by CRE, until 2018

Voltage >= 220 kV3.37

USD/MWh

Voltage < 220 kV7.68

USD/MWh

CENACE market operation tariffs, until 2018

Load Serving Entity 0.32 USD/MWh

Insights on CEL obligations and T&D tariffs

June, 2016 PRODESEN

http://www.cre.gob.mx/documento/1913.pdf

Conclusion

► EY has analyzed the extensive information contained in the Ministry of Energy’s recently released PRODESEN, which

is a comprehensive planning document that contains the blueprint for investment in Mexico’s energy sector over the

next 15 years (2016 – 2030).

► The PRODESEN represents an important component of Mexico’s historic reforms in the energy sector. It documents

the Mexican government’s intention to open the industry to global companies that possess the financial and technical

capabilities to invest in energy infrastructure. According to EY’s analysis, investment opportunities in the generation,

transmission and distribution sectors could exceed $120 million USD.

► The planning documents show that the majority of investment will be in the generation sector, since 75% of the budget

is directed towards that sector. The need for new generation is driven by historically strong growth in demand. For

instance, demand in 2015 was 2.9 percent higher than the previous year. Going forward, strong demand is predicted

over the next 15 years, with electricity consumption expected to average 3.4 percent annually. Moreover, our analysis

shows an imbalance between supply and demand in several regions of Mexico, which will require investments in

generation and/or transmission facilities.

► Overall, the PRODESEN reveals that the Mexico energy sector is in a dynamic period of transformation that will

provide significant investment opportunities for energy sector entities around the globe.

June, 2016 PRODESEN

EY Professionals

June, 2016 PRODESEN

Rafael Aguirre

Partner – Transaction Advisory Services

EY Mexico

Tel: +52 55 5283 8650

Email: [email protected]

Loic LeGall

Executive Director - Power & Utilities

EY Mexico

Tel: +52 (55) 4094 6488

E-mail: [email protected]

Alfredo Álvarez

Partner – Energy Segment Leader

EY Mexico

Tel: +52 (55) 5283 1179


Rodrigo FernándezPartner - Transaction Tax

EY Mexico

Tel: +52 (55) 5283 8666


Jimena González de Cossio

Partner - Legal

EY Mexico

Tel: +52 (55) 1101 7294


Paul RobertiExecutive Director - Power & Utilities

EY Mexico

Tel: +52 (55) 5283 8666


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About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and

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economies the world over. We develop outstanding leaders who team to deliver on our promises

to all of our stakeholders. In so doing, we play a critical role in building a better working world for

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