BMI View: The launch of a new long-term energy auction and the announcement of tenders for power transmission projects underscore our view that the Mexican power market will offer multiple business opportunities over the coming years. These developments, c oupled with Mexico's robust macroeconomic prospects and government plans for significant investment in the industry, continue to support our positive outlook for the Mexican power sector - with natural gas and renewables to outperform.
|e/f = BMI estimate/forecast. Source: EIA, BMI, National sources|
|Generation, Total, TWh||311.810||320.090||333.920||353.920||368.530||382.770||397.570|
|Consumption, Net Consumption, TWh||261.1||270.3||285.8||301.5||318.4||331.5||345.4|
|Capacity, Net, MW||68,620.6||71,256.8||76,743.9||82,796.1||85,871.7||87,771.7||89,976.6|
Latest Updates And Structural Trends
In May 2016, the Mexican government (via the agency managing the wholesale power market, Cenace) issued a tender for a second long-term energy and capacity auction, which is scheduled to be concluded in September 2016. Similarly to the auction held in March 2016, Cenace will sign long-term power purchase agreements (PPAs) with the auction's winners, and clean energy certiticates (CELs) will also be awarded.
In July 2016, it was reported that 87 companies plus productive state enterprise Comision Federal de Electricidad (CFE) have expressed interest in participating in the auction. Also in July, the Mexican government signed 18 long-term power generation contracts with the 11 companies that had presented the winning bids at the first auction in April.
In July 2016 the CFE announced that electricity tariffs for industrial, residential and commercial clients would rise in the month of July - the first time electricity prices head higher in more than one year. The CFE blamed the expected hike on an increase in the price of natural gas and fuel oil compared to the previous month. While Henry Hub and WTI prices rose in June, we think that the MXN sell-off in Q2 2016 exacerbated the impact on the cost of generating electricity via higher import expenses for the CFE - given Mexico's high reliance on natural gas imports from the US.
Recent developments have provided support to our long-held view that engineering, procurement and construction (EPC) contractors will find business opportunities in the Mexican power transmission and distribution sector. In April, Sener announced that the development of two key power transmission projects will be opened to participation by private companies over the coming months. These are a transmission line from the Tehuantepec isthmus (Oaxaca) to the centre of the country and a transmission line that will connect the power systems of Baja California and Mexico's main grid (Sistema Interconectado Nacional). The tender for this second project is expected to be launched by the end of 2016 or the start of 2017
Underscoring our positive outlook for the Mexican power sector, international investors are giving vast and growing attention to the market in the form of framework financing agreements or direct investment. In July 2016, The Mexican governments signed energy cooperation agreements with Italy, France and Norway.
Mexico's positive macroeconomic trajectory supports our forecast for robust growth in power consumption over the next ten years. BMI's Country Risk team remain optimistic toward Mexico's economic growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.
The Mexico Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Mexico Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Mexico to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Mexico's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Mexico.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).