Gas Imports Push Mexican Utility to Loss

Mexico’s state-owned utility, the Federal Electricity Commission (CFE) reported February 27 a loss of about $530mn for 2017, mostly because of the costs of importing natural gas and LNG from the US.

CFE said it lost almost MXN$10bn last year, against a profit of about MXN$85.5bn in 2016.

CFE said its revenues rose by 34% over 2016, but the cost of importing about half of the country’s daily gas needs contributed to the loss.

CFE said its operating costs rose by 36% “mainly (because of the cost of importing) fuels to generate electricity, which depend on international markets”.

Analyst Luis Miguel Labardini, of Marcos y Asociados, said the cost of importing natural gas should decline, as more pipelines are built to import gas. CFE had to import higher volumes of higher cost LNG last year than budgeted for.

Against higher import bills, CFE is attempting to control costs, and last year reduced staff by about 3,000, bringing its total complement of employees to less than 10,000.

Last spring CFE presented a five-year business plan that proposed investments of MXN$256bn (about US$13.6bn) and partnerships with private sector firms.

The company plans to invest MXN$168bn in new generation capacity, as well as in modernising existing power stations. Transmission lines will see about MXN$40bn in spending, while MXN$48bn will be spent on distribution, including the development of a smart grid.

CFE said it is budgeting to reduce operating costs in the five-year plan by 21%, resulting in savings of about MXN$21bn, and would seek to generate additional savings by consolidating its 13 subsidiaries and affiliates.