Latin Finance - September/October 2010 - 88

Mexico mexico cfe

CFE Ups Its Game
by Natalie Feary exican state-owned electricity provider Comisión Federal de Electricidad (CFE) is ambitious in the investment it wants to make over the next few years, and is in a comfortable position to do so, with 2010 financing needs already met. In an exclusive plants in the north of Mexico, where there is interview, CFO Francisco Santoyo low reserve capacity. One will incorporate a Vargas tells LatinFinance how he will solar energy park. ensure the utility keeps pace. Santoyo says CFE is already using a host “We are firmly committed to of new technologies. It uses combined cycles modernization and innovation as and has recently included a “Super Critical part of our development strategy,” Coal-Fired Power Plant,” as one of its ways stresses the CFO. “After a relatively to generate electricity. The technology uses long period without growth, economic increased pressure and temperature, making activity is starting to pick up so we will it more efficient, so it is considered cleaner be investing extensively in electricity and safer. generation,” adds Santoyo. For the next seven years, CFE Cheaper in Pesos forecasts investment requirements of To finance projects, CFE uses a diverse mix an average of 63 billion pesos per year of bonds, bilateral loans from Mexican and for plants and generation of electricity. foreign banks, export credit, and structured Approximately 32 billion pesos of finance. “This year, the cost of funding has this will come from CFE, with the been more favorable in the bond than in the other half being provided by private loan market, but we like to be a frequent Working on foreign bond: Santoyo electricity providers. issuer and use a diverse range of funding CFE’s investment will be more than tools so that we are not at a disadvantage by double the average investment per year it has made in the past focusing on one particular format,” says Santoyo. seven years, of 13 billion pesos. Construction and investment CFE is working with the finance ministry on an overseas programs span a 15-year timeframe, though there are annual bond issue. “We would like to do this soon, though in the Latin adjustments depending on the country’s demands. concept of soon, we don’t know how many months this will Santoyo adds that the annual investment for 2017take,” says Santoyo, though he expects it to take place in 2011. 2024 has not yet been defined. For electricity generation Santoyo estimates a 75-225 basis point pickup over pesos and transmission, CFE has created a category called “free when funding in dollars. Despite this, he says the depth of technology.” “This is where we follow up new technology or international markets makes issuing there desirable. clean technology that at present may not be feasible because of CFE has clearly taken advantage of improved market price, but because of further innovation or increased production conditions. By August the commission had already met its 18 these new technologies could be cost efficient in the future,” says billion peso financing needs for 2010, though it will look to the CFO. issue a bond locally in October or November to pre-fund 2011. Approximately half of the 63 billion pesos annual spend over “We do not want to find ourselves in a situation where there is the next two years will go towards electricity generation. This pressure to fund should there be external shocks like last year” will include developing wind farms in Oaxaca and electricity says Santoyo. LF

As Mexico’s economy starts to revive, CFE is confident in its ability to meet growing electricity needs. Technology, transparency and investor relations will be key.

88 LatinFinance

September/October 2010

Latin Finance - September/October 2010

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