Fitch Publishes CFE Energy Reform Sensitivity Analysis

MONTERREY, Mexico--()--Mexico's energy reform is a long-term positive for the country, while Comision Federal de Electricidad (CFE) may face margin pressures, according to a new Fitch Ratings sensitivity analysis report.

"CFE will remain strategically important with its linkage to the government continuing to support ratings. Post-reform challenges for CFE include improving competitiveness by lowering generation costs and reducing losses. This in order to be able to offer more competitive rates for industrial users and not lose industrial load to new entrants," said Lucas Aristizabal, Senior Director.

Fitch believes CFE's most likely scenario over the next two to three years is some industrial load loss coupled with increased usage of natural gas instead of fuel oil to generate electricity. The company could also lower technical losses to improve its competitiveness. These factors will likely result in a decrease in the company's cash flow generation ability. Consequently, the company will continue to need tangible and explicit support from central government absent changes in the tariff structure and stronger energy laws that discourage theft.

Overall, the energy reform is a positive for Mexico's competitiveness. Industrial and commercial electricity users with large enough loads to enter into bilateral contracts with independent power producers stand to see electricity rates decline as a result of the increased competition promoted by the energy reform.

For more information, a special report titled 'Comision Federal de Electricidad Scenario Analysis' is available on the Fitch Ratings' web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Comision Federal de Electricidad Scenario Analysis (CFEs Transition to Market Poses Competitive Challenges)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750342

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Contacts

Fitch Ratings
Alberto De Los Santos
Associate Director
+52-81-8399-9100
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612 Monterrey, N.L., Mexico
or
Lucas Aristizabal
Senior Director
+1-312-368-3260
or
Sergio Rodriguez
Senior Director
+52-81-8399-9100
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Alberto De Los Santos
Associate Director
+52-81-8399-9100
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612 Monterrey, N.L., Mexico
or
Lucas Aristizabal
Senior Director
+1-312-368-3260
or
Sergio Rodriguez
Senior Director
+52-81-8399-9100
or
Media Relations
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com