Electric Power Supply and Generation in Mexico

Transcription

1 16th Annual Mexican Energy Conference Nov, Electric Power Supply and Generation in Mexico Alfredo Santillan Representative SMBC - Mexico Representative Office

2 Electricity Industry 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/Cogeneration & 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. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 1

3 Electricity Industry 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%. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 2

4 Electricity Industry 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) Geothermal, 2% Coal, 5% Nuclear, 3% Eo lic, 0% Hydro, 22% IPP, 23% Thermal, 46% Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 3

5 Overview of the Mexican Wind Power Market (Continued) Electricity Industry 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 4 PRIVATE & CONFIDENTIAL Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 4

6 Main Players 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) Mitsubishi 990 MW AES Intergen 484 MW 754 MW Iberdrola 4,239 MW Gas Natural 1,941 MW Mitsui 2,510 MW Note: The following Japanese companies are minority partners in some power plants: Kyushu, Chubu, Tokyo Gas and Tohoku. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 5

7 Main Players EPC Contract participants (last 5 years) EPC Contractor Project Fuel KepCo / Samsung C&T / Techint Iberinco Norte II (433MW) Phase I - Salamanca (430MW) Gas Combined Cycle 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) Mitsui / Samsung / Kogas / TOA Manzanillo LNG Eolic LNG Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 6

8 Investments/Outlook In the next 15 years ( ), 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). Distribution 23% Maintenance 1% CFE's Budget 40% OPF 30% Transmission 18% Generation 58% IPP 30% The private sector represents a key player in the future investments for the Sector IPPs & OPF. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 7

9 Investments/Outlook Additional Capacity Requirements period: Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 8

10 Expansion Project / Supply Challenges 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. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 9

11 Expansion Project / Supply Challenges 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. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 10

12 Expansion Project / Supply Challenges Mexican Gas Market The shale gas revolution in the U.S., based on the exploitation of hydrofracking 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. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 11

13 Main Schemes for Private Investment Independent Power Producers (IPPs). Public Works Contracts (OPF) Scheme utilized in generation projects, excluding hydroelectric plants. Projects awarded through international tenders Most competitive KW/h. Companies are responsible for the financing during construction. CFE signs a power purchase agreement (25 years) At COD. Normally used in transmission lines, substations, hydroelectric plants, revamping, etc. Projects awarded through international tenders Most competitive turn-key price. Companies are responsible for the financing during construction. 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. Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 12

14 How to Structure a Bankable Project Key Elements for a Successful Financing Experienced EPC Contractor Proven Technology EPC Contractor Lump Sum Turn Key approach is preferred Equipment & Technology Providers Feedstock Supplier (i.e. PEMEX) Adequate liquidated damages Project Clear strategy to sell the Project s output (offtakers and marketers) Reliable suppliers Experienced operator Environmental and social risks properly mitigated Equator Principles Offtakers and/or Marketers Construction phase Operating phase Utility Providers Copyright 2012 Sumitomo Mitsui Banking Corporation. All Rights Reserved. 13

15 Thank You! Q&A Alfredo Santillan Representative SMBC - Mexico Representative Office