mexico’s 3rd long-term power auction - building a better...

Energy Alert

Mexico’s 3rd Long-Term Power Auction

November 2017

Final results of the 3rd LT Power Auction2 5

Executive Summary1 3

Comparison of the Mexican LT Power Auctions to date3 13

EY Professionals5 16

International Context4 15

Table of Contents

Executive SummaryKey Highlights of the SLP-1/2017

► New lowest Energy + Clean Energy Certificates weighted average price = $20.57 USD/MWh (in the 2nd LT PowerAuction, the price was $33.47 USD/MWh).

► The total estimated investment is $2.369 billion USD over the next three years.

► 15 new power plants will be installed: 9 Solar PV, 5 Wind and 1 Turbo Gas

► As with previous auctions, Mexico’s dominant utility (Federal Electricity Commission or CFE) purchases all of theavailable products, in order to meet the requirements of its Basic Service customers.

► Due to the addition of a Clearing House, this auction permitted private companies to submit purchase offers;Iberdrola and CEMEX took advantage on this option and submitted offers as potential buyers.

► This Auction fetched prices 27.3% lower than established ceiling prices.

3rd Long-Term Power Auction in Mexico 2017

Key Aspects Participants Next important dates

► A complex bid evaluation process with regional adjustment of bid prices

► Bidders offer packages of up to 3 different products: Capacity, Cumulative Energy and Clean Energy Certificates

► Bidders were allowed to offer a combined package price for the totality of offered products

► Different from auctions in 2015 and 2016, a Clearing House is now stablished, allowing private buyers to compete face to face with CFE

► Buyers: CFE SSB (Basic Service Supplier, per its acronym in Spanish. This is a State productive company) and private entities

► Clearing House: corporate entity that administers all contracts awarded through auctions

► Bidders: foreign and local private investors alongside CFE SSB

► December 18th 2017: SPV incorporation

► March 18th 2018: Contract subscription

► June 2019-June 2020: Commercial operation date

Source: SENER, CENACE and EY

The Purchase Offer for the 3rd Long-Term Power Auction adds up to:

5.49 TWh 90.2% of Initial Purchase Energy Offer

5.95 MCECs97.8% of Initial Purchase CECs Offer

593 MW 41.9% of Initial Purchase Capacity Offer

15 new power plants in 8 different states

2,562 MW of new clean capacity in this Auction, bringing a total of 7,451 MW in the three auctions

The combined output of the plants will account for 1.78% of the total annual generation in Mexico

Breakdown of capacity:

84% Turbo Gas

13.95% Wind

1.69% Solar PV



This Auction enables Mexico to meet its clean energy target of achieving 35% of its electricity generation from renewable sources of energy by 2035, and 50% by 2050.

Executive SummaryKey Highlights of the SLP-1/2017

Details of final awarded projects



Company State TechnologyCapacity offered

(MW/year)Cum. Energy offered

(MWh/year)CECs offered (CEC/year)

Offered Price (USD/year)

Cum. Energy (USD/MWh)1

CEC (USD/CEC)1

X-Elio Energy Sonora Solar PV 10.00 435,354 483,727 10,795,018 15.54 7.77

Neoen International Aguascalientes Solar PV - 616,692 770,864 12,646,167 12.62 6.31

Compañía de Electricidad Los Ramones

Nuevo León Turbo Gas 499.95 - - 18,298,170 - -

Canadian Solar Energy México Sonora Solar PV - 235,640 265,095 5,522,812 15.00 7.50

Canadian Solar Energy México Aguascalientes Solar PV - 206,017 247,220 4,175,275 12.67 6.33

Canadian Solar Energy México Sonora Solar PV - 210,426 252,511 4,848,214 14.40 7.20

Consorcio Engie Eólica Tamaulipas Wind 30.62 362,935 391,805 7,982,230 13.03 6.52

Consorcio Engie Solar 1 Sonora Solar PV - 280,055 302,332 6,052,738 14.04 7.02

Consorcio Engie Solar 1 Tlaxcala Solar PV - 486,313 524,997 10,359,879 13.84 6.92

Consorcio Engie Solar 4 Chihuahua Solar PV - 379,603 434,486 8,235,423 13.80 6.90

Enel Rinnovabile Coahuila Wind - 373,017 373,016 6,624,769 11.84 5.92



Enel Rinnovabile Nuevo León Wind - 848,883 848,883 16,475,585 12.94 6.47

Mitsui & Co. and Trina Solar Zacatecas Solar PV - 189,928 189,928 3,749,179 13.16 6.58

Energía Renovable del Istmo II Tamaulipas Wind 52.04 - - 1,691,300 - -

Exchange rate MXN/USD: $19.185

1 Based on weighted formula established under the “Long-Term Auction Manual” (in Spanish, “Manual de Subastas de Largo Plazo”).

Technology distribution for awarded projects and selected States

58%

42%

55%

45%

CEC

Cumulative

Energy

Capacity

2%14%

84%

Solar

Wind

Turbo Gas

► Tlaxcala and Zacatecas are states that got awarded projects for the first time.


► 1 Sonora

► 2 Chihuahua

► 3 Coahuila

► 4 Nuevo León

► 5 Tamaulipas

► 6 Zacatecas

► 7 Aguascalientes

► 8 Tlaxcala

1

2

34

5

6

78

Selected Sates (3rd Auction)

Wind Turbo GasSolar


Allocated amounts by technology

26%

CEC Cumulative Energy Capacity

AwardedInitial

Purchase Offer

Not Awarded AwardedNot Awarded AwardedNot Awarded

10%

50%

40%

100%

26%

58%

100%

1%

6%

%

35%

2%

41%

57%

► CEC 5.95 MCECs

► Cumulative Energy 5.49 TWh

► Capacity 593 MW

Initial Purchase

Offer

Initial Purchase

Offer

100%


Wind Turbo GasSolar


27.19

36.60

22.81

32.50

- 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00

X-ELIO ENERGY

COMPAÑÍA DE ELECTRICIDAD LOS RAMONES

CONSORCIO ENGIE EOLICA

ENERGIA RENOVABLE DEL ISTMO II

Capacity Results

Capacity resultsBy company and by technology

Pro

du

ct o

ffere

d

(GW

-ye

ar)

Thousand(USD/GW)


Wind Turbo GasSolar



0 5 10 15 20 25 30 35 40

Obregón

Aguascalientes

Monterrey

Hermosillo

Güemez

Central

Moctezuma

Río Escondido

Reynosa

LMP range (min - max)USD/GWh

1a,b,c,d. Enel Rinnovabile

2. Consorcio Engie Solar 4

3a,b. Consorcio Engie Solar 1

4. Consorcio Engie Eólica

5a,b,c. Canadian Solar EnergyMéxico

6. Mitsui & Co. and Trina Solar Holdings

7. Neoen International

8. X-Elio Energy

Awarded nodes analysis



Awarded Energy (GWh)

1,698

2,481

814

1,011

755

1,083

-

2,221

1,382

Source: SENER and EY

8.

7.

5a.

5b.

5c.

4.

3a.

3b.

2.

1a,b,c.

6.

Energy + CEC weighted average price USD/GWh with nodal adjustment1

1d.

1 Even without the nodal adjustment, the offered price still below the LMP range.

$1

,06

3,7

42

.54

$1

,05

4,8

78

.02

$1

,04

6,0

13

.50

$1

,03

7,1

48

.98

$1

,02

8,2

84

.46

$1

,01

9,4

19

.93

$1

,01

0,5

55

.41

$1

,00

1,6

90

.89

$9

92

,82

6.3

7

$9

83

,96

1.8

5

$9

75

,09

7.3

3

$9

66

,23

2.8

1

$9

57

,36

8.2

9

$9

48

,50

3.7

6

$9

39

,63

9.2

4

$9

30

,77

4.7

2

$9

21

,91

0.2

0

$9

13

,04

5.6

8

$9

04

,18

1.1

6

$8

95

,31

6.6

4

$8

86

,45

2.1

2

$8

77

,58

7.6

0

$8

68

,72

3.0

7

$8

59

,85

8.5

5

$8

50

,99

4.0

3

$3

19

,12

2.7

6

$2

65

,93

5.6

4

$2

12

,74

8.5

1

$1

59

,56

1.3

8

$1

06

,37

4.2

5

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

Un

it P

rice

(US

D p

er

MW

h/y

ea

r)

Amount of MW

Capacity Price Curve - SIN - 3rd LT Auction

Capacity’s Purchase Offers presented for the Interconnected National System (SIN per its acronym in Spanish) by CFE SSB

Source: CENACE



$3

9.1

7

$3

8.8

5

$3

8.5

2

$3

8.1

9

$3

7.8

7

$3

7.5

4

$3

7.2

1

$3

6.8

9

$3

6.5

6

$3

6.2

4

$3

5.9

1

$3

5.5

8

$3

5.2

6

$3

4.9

3

$3

4.6

0

$3

4.2

8

$3

3.9

5

$3

3.6

2

$3

3.3

0

$3

2.9

7

$3

2.6

4

$3

2.3

2

$3

1.9

9

$3

1.6

6

$3

1.3

4

$2

7.4

2

$2

3.5

0

$1

9.5

9

$1

5.6

7

$1

1.7

5

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Un

it P

rice

(US

D p

er

MW

h/y

ea

r)

Amount of MWh

Cumulative Energy Price Curve - SEN - 3rd LT Auction

Energy’s Purchase Offer presented for the National Electricity System (SEN per its acronym in Spanish) by CFE SSB

Source: CENACE



$2

1.0

9

$2

0.9

2

$2

0.7

4

$2

0.5

7

$2

0.3

9

$2

0.2

1

$2

0.0

4

$1

9.8

6

$1

9.6

9

$1

9.5

1

$1

9.3

4

$1

9.1

6

$1

8.9

8

$1

8.8

1

$1

8.6

3

$1

8.4

6

$1

8.2

8

$1

8.1

0

$1

7.9

3

$1

7.7

5

$1

7.5

8

$1

7.4

0

$1

7.2

3

$1

7.0

5

$1

6.8

7

$1

5.8

2

$1

3.7

1

$1

1.6

0

$9

.49

$7

.38

$0

$5

$10

$15

$20

$25

Un

it P

rice

(US

D p

er

MW

h/y

ea

r)

Amount of CECs

CEC's Curve - SEN - 3rd LT Auction

CEC’s Purchase Offer presented for the Electricity National System (SEN per its acronym in Spanish) by CFE SSB

Source: CENACE




PV Solar represented:

4 TWh4 MCECs

‘1st LT Power Auction2015

2nd LT Power Auction2016

Energy awarded

5.4 TWh

CECs awarded

5.4 MCECs

Energy awarded

8.9 TWh

CECs awarded

9.3 MCECs

Capacity awarded

1,200 MW

Energy awarded

5.49 TWh

CECs awarded

5.95 MCECs

Capacity awarded

593 MW

3rd LT Power Auction2017


4.8 TWh4.9 MCECs

184 MW


3.0 TWh3.4 MCECs

10 MW

Awarded electricity in the 3rd LT Power Auctions to date


► The previous table shows the final numbers considering the weighted formula established under the“Long-Term Auction Manual” (in Spanish, “Manual de Subastas de Largo Plazo”).

► Price comparison of 3rd LT Power Auction to 2nd LT auction results: average price of Clean Energy(Energy + CEC) declined by 38%, and compared to 1st LT auction results, 57% lower.

► In the recent Auction, the sale offers gave an economic surplus above 50%, translating it intosavings over 27%.

Comparative of 1st, 2nd and 3rd Long-Term AuctionsBased on weighted formula of the Auction Manual

3rd LT Auction

2nd LT Auction

1st LT Auction



Capacity (USD/MW)

Cumulative Energy (USD/MWh)

CEC(USD/CEC)

Amount 593 5,492,575 5,952,575

Max. Price $36,601.57 $15.54 $7.77

Avg. Price $29,776.11 $13.34 $6.67

Amount 1,187 8,909,819 9,275,534

Max. Price $54,973.95 $26.47 $19.52

Avg. Price $29,439.06 $20.28 $13.08

Amount - 5,402,880 5,380,911

Max. Price $ - $43.72 $21.86

Avg. Price $ - $31.99 $16.44

Exchange rate MXN/USD:1st Auction: $17.332nd Auction: $183rd Auction: $19.185

International ContextMexico is more competitive than ever

Wind power at $17.7 USD/MWh offered by Enel, represents some of the lowest electricity prices in the world; previous it was Saudi Arabia at $17.9 USD/MWh

Consistent with previous Long-Term Power Auctions in Mexico, solar and wind power prices continue to reflect dramatic price declines


Source: Clean Technica, Electrek and EY

► While the lowest solar power prices occurred in Saudi Arabia just a fewmonths ago, Mexico’s prices still come very close at $19.7 USD/MWh,breaking its own record with the last two power auctions.

$0.00

$0.01

$0.02

$0.03

$0.04

$0.05

$0.06

$0.07

$0.08

$0.09

Lowest Solar Power pricing (USD/KWh)

José Salas

Partner - Advisory

EY Mexico

Tel: +52 (55) 1101 7329

Email: [email protected]

Rafael Aguirre

Partner - Transaction Advisory Services

EY Mexico

Tel: +52 (55) 5283 8650


Alfredo Álvarez

Partner - Energy Segment Leader

EY Mexico

Tel: +52 (55) 5283 1179


Paul Roberti

Executive Director - Power & Utilities

EY Mexico

Tel: +52 (55) 5283 8666

E-mail: [email protected]


Héctor Rocha

Partner - Markets & Business Development

EY Mexico

Tel: +52 (55) 5283 1300


EY Professionals

EY | Assurance | Tax | Transactions | Advisory

About EY

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

quality services we deliver help build trust and confidence in the capital markets and in

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

our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst &

Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a

UK company limited by guarantee, does not provide services to clients. For more information

about our organization, please visit ey.com/mx

© 2016 EYGM Limited.

All Rights Reserved.

mexico’s 3rd long-term power auction - building a better...

Documents