fw : the road to competitive electricity markets in mexico - - - - - original message - - - - -
from : sandputil @ standardandpoors . com [ mailto : sandputil @ standardandpoors . com ]
sent : thursday , december 20 , 2001 10 : 02 am
to : rohauer , tanya
subject : the road to competitive electricity markets in mexico
standard and poor ' s ratingsdirect link
this report was reproduced from standard & poor ' s web - based credit ratings and research service , ratingsdirect .
click here to get a free 30 - day trial !
your connection to standard & poor ' s
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standard & poor ' s is pleased to provide ongoing service to the investment community .
research :
need for capital investment
the push toward competitive electricity markets in mexico is driven by the need for investment in power generation and the reluctance of the mexican government to continue to add off - balance sheet debt in the form of the ipp contracts . mexico is forecast to require investments in the power sector of about $ 5 billion per year during the next 10 years to keep up with demand , most of which is expected to come from private investors . although the current economic conditions may adjust this forecast downward , substantial investment will still be required in the sector . even though the ipp program has been successful thus far , standard & poor ' s views these contracts as off - balance sheet debt of cfe , which puts negative pressure on cfe ' s credit rating . because the obligations under many of these contracts cross default with cfe ' s debt , which in turn cross defaults with some of the sovereign debt , these contracts also apply negative pressure to the sovereign rating . while this pressure is not substantial today , if the ipp program continues to be the sole source of new generation in mexico , these obligations will have a greater affect on the sovereign rating over time . therefore , a move to a fully competitive electricity market , where private investors take all of the financing risks , will alleviate credit pressure on the sovereign from the electric sector .
in the interim , the comision reguladora de energia ( cre ) is working on creating a framework for the potential liberalization of the industry . cre envisions the creation of an independent system operator to manage generation commitment , dispatch , and billing . state - owned generators would be divided into regional entities to promote competition . the distribution sector would also be divided into several regional entities , and a concession for the operation and maintenance of these systems could be granted . the transmission network would remain as a single public entity , although concessions for new transmission projects could be granted .
liberalization of the electricity sector
during the past nine years , mexico has gradually liberalized the restrictions on the power market . cfe enjoyed a monopoly in the electric power sector for many years , although reforms instituted in 1992 allowed ipps to sell power to cfe and industrial customers under self - supply regulations . in 1996 , cfe devised a financing plan to meet projected electric demand growth . the objectives of the plan were to lower the company ' s debt leverage , finance projects at a lower cost , and extend the maturities of these obligations . as a result , for the first time , several new projects were structured as build - lease transfers ( blt ) , which are similar to lease transactions . under this structure , a third party finances and builds a plant ( or transmission line , or transformer ) and leases the plant to cfe for a period during which the investment is amortized . at the end of this timeframe , ownership of the asset is transferred to cfe . these blt arrangements indirectly assigned much of the operating risk to cfe , as cfe was required to pay for service even if the asset was unavailable . new facilities are now being constructed under ipp contracts . these arrangements are structured as take - and - pay power purchase agreements whereby cfe will not pay for power if it is not delivered . the next step would appear to be the creation of an open market system where participants are free to buy and sell electricity . yet , the outlook for the creation of such a system is unclear in mexico , given the highly politicized tripartisan environment that governs the decision - making process .
ratingsdirect link is a free service provided by standard & poor ' s . if you do not wish to receive further e - mails related to this topic only , please send a blank e - mail to leave - projfin @ ratingslist . standardandpoors . com .
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if you would like to be added to this list , please send an e - mail to join - projfin @ ratingslist . standardandpoors . com . you will be asked to confirm your request .
this report was reproduced from standard & poor ' s ratingsdirect , the premier source of real - time , web - based credit ratings and research from an organization that has been a leader in objective credit analysis for more than 140 years . to preview this dynamic on - line product , visit our ratingsdirect web site at .
published by standard & poor ' s , a division of the mcgraw - hill companies , inc . , executive offices : 1221 avenue of the americas , new york , n . y . 10020 . editorial offices : 55 water street , new york , ny 10041 . subscriber services : ( 1 ) 212 - 438 - 7280 . copyright 2001 by standard & poor ' s , a division of the mcgraw - hill companies . reproduction in whole or in part prohibited except by permission . all rights reserved . in providing the information on this e - mail ( the " standard & poor ' s information " ) standard & poor ' s has relied on information obtained from third - party sources and standard & poor ' s has not independently verified such information . standard & poor ' s makes no guarantees or warranties as to the accuracy or completeness of or results to be obtained from accessing and using the standard & poor ' s information . neither standard & poor ' s nor its affiliates shall be liable to any user or anyone else for any inaccuracy , error , or omission , regardless of cause , in standard & poor ' s information or for any damages resulting there from .
standard & poor ' s ratings are not market ratings nor are they recommendations to buy , hold , or sell any security or obligation issued by an obligor . standard & poor ' s relies on information provided by obligors , their accountants , counsel , and other experts and does not perform an audit in connection with any rating . the sending of the e - mail by users should not be construed as an endorsement of the accuracy of any of the data or conclusions , or as an attempt to independently assess or vouch for the financial condition of any company . standard & poor ' s receives compensation for determining ratings . such compensation is based on the time and effort to determine the ratings and is normally paid by the entity being rated . the compensation generally varies from us $ 10 , 000 to us $ 1 , 000 , 000 . while standard & poor ' s reserves the right to disseminate the rating , it receives no payment for doing so except for subscriptions to its publications .
standard & poor ' s uses web usage , billing , and contact data from subscribers for billing and order fulfillment purposes , for new product development and occasionally to inform subscribers about products or services from standard & poor ' s and the mcgraw - hill companies . if you have any questions about our privacy practices or would like to review the accuracy of the information you ' ve provided , please contact edward tyburczy at or refer to the mcgraw - hill companies customer privacy policy at
the information contained in this message is intended only for the recipient , may be privileged and confidential and protected from disclosure . if the reader of this message is not the intended recipient , or an employee or agent responsible for delivering this message to the intended recipient , please be aware that any dissemination or copying of this communication is strictly prohibited . if you have received this communication in error , please immediately notify us by replying to the message and deleting it from your computer .
thank you ,
standard & poor ' s
fw : the road to competitive electricity markets in mexico
- - - - - original message - - - - -
from : sandputil @ standardandpoors . com [ mailto : sandputil @ standardandpoors . com ]
sent : thursday , december 20 , 2001 10 : 02 am
to : rohauer , tanya
subject : the road to competitive electricity markets in mexico
standard and poor ' s ratingsdirect link
this report was reproduced from standard & poor ' s web - based credit ratings and research service , ratingsdirect .
click here to get a free 30 - day trial !
your connection to standard & poor ' s
utilities , oil & gas , and project finance ratings team
standard & poor ' s is pleased to provide ongoing service to the investment community .
research :
need for capital investment
the push toward competitive electricity markets in mexico is driven by the need for investment in power generation and the reluctance of the mexican government to continue to add off - balance sheet debt in the form of the ipp contracts . mexico is forecast to require investments in the power sector of about $ 5 billion per year during the next 10 years to keep up with demand , most of which is expected to come from private investors . although the current economic conditions may adjust this forecast downward , substantial investment will still be required in the sector . even though the ipp program has been successful thus far , standard & poor ' s views these contracts as off - balance sheet debt of cfe , which puts negative pressure on cfe ' s credit rating . because the obligations under many of these contracts cross default with cfe ' s debt , which in turn cross defaults with some of the sovereign debt , these contracts also apply negative pressure to the sovereign rating . while this pressure is not substantial today , if the ipp program continues to be the sole source of new generation in mexico , these obligations will have a greater affect on the sovereign rating over time . therefore , a move to a fully competitive electricity market , where private investors take all of the financing risks , will alleviate credit pressure on the sovereign from the electric sector .
in the interim , the comision reguladora de energia ( cre ) is working on creating a framework for the potential liberalization of the industry . cre envisions the creation of an independent system operator to manage generation commitment , dispatch , and billing . state - owned generators would be divided into regional entities to promote competition . the distribution sector would also be divided into several regional entities , and a concession for the operation and maintenance of these systems could be granted . the transmission network would remain as a single public entity , although concessions for new transmission projects could be granted .
liberalization of the electricity sector
during the past nine years , mexico has gradually liberalized the restrictions on the power market . cfe enjoyed a monopoly in the electric power sector for many years , although reforms instituted in 1992 allowed ipps to sell power to cfe and industrial customers under self - supply regulations . in 1996 , cfe devised a financing plan to meet projected electric demand growth . the objectives of the plan were to lower the company ' s debt leverage , finance projects at a lower cost , and extend the maturities of these obligations . as a result , for the first time , several new projects were structured as build - lease transfers ( blt ) , which are similar to lease transactions . under this structure , a third party finances and builds a plant ( or transmission line , or transformer ) and leases the plant to cfe for a period during which the investment is amortized . at the end of this timeframe , ownership of the asset is transferred to cfe . these blt arrangements indirectly assigned much of the operating risk to cfe , as cfe was required to pay for service even if the asset was unavailable . new facilities are now being constructed under ipp contracts . these arrangements are structured as take - and - pay power purchase agreements whereby cfe will not pay for power if it is not delivered . the next step would appear to be the creation of an open market system where participants are free to buy and sell electricity . yet , the outlook for the creation of such a system is unclear in mexico , given the highly politicized tripartisan environment that governs the decision - making process .
ratingsdirect link is a free service provided by standard & poor ' s . if you do not wish to receive further e - mails related to this topic only , please send a blank e - mail to leave - projfin @ ratingslist . standardandpoors . com .
if you do not wish to receive further e - mails on any topic , please click here or send an e - mail with the subject " unsubscribe " to ratings _ customerrelations @ standardandpoors . com
if you would like to be added to this list , please send an e - mail to join - projfin @ ratingslist . standardandpoors . com . you will be asked to confirm your request .
this report was reproduced from standard & poor ' s ratingsdirect , the premier source of real - time , web - based credit ratings and research from an organization that has been a leader in objective credit analysis for more than 140 years . to preview this dynamic on - line product , visit our ratingsdirect web site at .
published by standard & poor ' s , a division of the mcgraw - hill companies , inc . , executive offices : 1221 avenue of the americas , new york , n . y . 10020 . editorial offices : 55 water street , new york , ny 10041 . subscriber services : ( 1 ) 212 - 438 - 7280 . copyright 2001 by standard & poor ' s , a division of the mcgraw - hill companies . reproduction in whole or in part prohibited except by permission . all rights reserved . in providing the information on this e - mail ( the " standard & poor ' s information " ) standard & poor ' s has relied on information obtained from third - party sources and standard & poor ' s has not independently verified such information . standard & poor ' s makes no guarantees or warranties as to the accuracy or completeness of or results to be obtained from accessing and using the standard & poor ' s information . neither standard & poor ' s nor its affiliates shall be liable to any user or anyone else for any inaccuracy , error , or omission , regardless of cause , in standard & poor ' s information or for any damages resulting there from .
standard & poor ' s ratings are not market ratings nor are they recommendations to buy , hold , or sell any security or obligation issued by an obligor . standard & poor ' s relies on information provided by obligors , their accountants , counsel , and other experts and does not perform an audit in connection with any rating . the sending of the e - mail by users should not be construed as an endorsement of the accuracy of any of the data or conclusions , or as an attempt to independently assess or vouch for the financial condition of any company . standard & poor ' s receives compensation for determining ratings . such compensation is based on the time and effort to determine the ratings and is normally paid by the entity being rated . the compensation generally varies from us $ 10 , 000 to us $ 1 , 000 , 000 . while standard & poor ' s reserves the right to disseminate the rating , it receives no payment for doing so except for subscriptions to its publications .
standard & poor ' s uses web usage , billing , and contact data from subscribers for billing and order fulfillment purposes , for new product development and occasionally to inform subscribers about products or services from standard & poor ' s and the mcgraw - hill companies . if you have any questions about our privacy practices or would like to review the accuracy of the information you ' ve provided , please contact edward tyburczy at or refer to the mcgraw - hill companies customer privacy policy at
the information contained in this message is intended only for the recipient , may be privileged and confidential and protected from disclosure . if the reader of this message is not the intended recipient , or an employee or agent responsible for delivering this message to the intended recipient , please be aware that any dissemination or copying of this communication is strictly prohibited . if you have received this communication in error , please immediately notify us by replying to the message and deleting it from your computer .
thank you ,
standard & poor ' s