Boston, MA -- (ReleaseWire) -- 12/07/2012 -- BMI View: Whilst we continue to hold the view that gas generation will remain dominant in Mexico, supported by existing capacity and access to cheap gas, we note that this quarter has seen some interesting developments in the hydropower sector. Most notably, the Federal Electricity Commission (CFE) sold MXN13.5bn (some US$1.05bn) in bonds on the domestic market to finance construction of the La Yesca hydroelectric power plant in September 2012. With regard to consumption, we continue to anticipate a fairly robust 3.07% year-on-year (y-o-y) average growth for power consumption in 2012, but we caution that a moderation is likely in 2013.
Despite the fact that Mexico's economy is expected to remain in positive territory, our Country Risk service believes that the country's headline growth will slow gradually throughout H212 on the back of a moderation in both the secondary and tertiary sectors. Hence we anticipate that a robust 3.07% y-o-y growth for power consumption in 2012, will give way to a slightly less positive 2.93 in 2013. That said, a still relatively positive long term outlook underpins our forecasts for a fairly robust 2.74% y-o-y average growth of Mexico's power consumption between 2013 and 2021. A trend further supported by considerations concerning the country's low per capita consumption and relatively high energy intensity.
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With Mexico relatively well placed compared to some of its regional peers in terms of its power generating infrastructure, we reiterate our view that, while new investments will be necessary to substitute ageing capacity and meet growing demand, attempts to diversify the energy mix will be a key component and driver of capacity expansion and refurbishment programmes. From this perspective, we notice that:
- Mexico's adoption of both CO2 emissions and renewable electricity generation targets in 2012 has cemented the country's desire to develop its renewables industry. The country has made significant headway in the expansion, as a number of large developments come online and the project pipeline continues to strengthen. However, we maintain our assessment that if Mexico is to meet the ambitious targets outlined by the legislation, a comprehensive regulatory framework will need to be put in place in order to sustain the level of investment, and thus, growth in the sector.
- Despite some persisting difficulties in the sub-sector, a few selected hydropower projects are gaining traction in the country, with the CFE selling MXN13.5bn in bonds on the domestic market to finance construction of the La Yesca hydroelectric power plant in September 2012. La Yesca is part of the Santiago Hydroelectric System, which includes 27 projects with potential generating capacity of 4,300MW and will rank No. 3 in electricity generation after the Aguamilpa-Solidaridad and El Cajon power plants.
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