VIEW FROM THE TOP
FROM CORPORATE STRUCTURE OVERHAUL TO CUMULATING EFFICIENCIES JAIME HERNÁNDEZ 18
Director General of CFE
Q: What were CFE’s 2017 milestones?
diesel, with more cost-effective, environmentally friendly
A: The reform of Mexico’s electricity sector meant the
sources such as natural gas and renewables a priority.
overhaul of CFE’s corporate structure. To date, we are operating with 13 new companies. The process involved
From the 25 gas pipelines we are developing, 12 are
a considerable operational challenge, which we tackled
already operational, 12 are in construction phase and one
successfully. Of the 13 new companies created, six are
branch line in the northern region of the country was
power producers that compete against each other and
recently tendered. Between 2012 and 2016, we decreased
the rest belong to the private sector. There is also a sole
our emissions relating to electricity generation by 44
national transmission company for the sake of system
percent. We also launched a pilot program for fuel storage
security, two new energy trading companies—one for basic
in Sonora and Baja California to strengthen the country’s
supply for small-scale consumers and a qualified user for
energy security. While the international standard sets
primarily industrial consumers. We have one distribution
fuel storage capacity at 30 days of average equivalent
company that oversees mid and high voltage with 16
consumption, Mexico only has three. This pilot project
business units spanning different regions, enabling us to
will increase Baja California’s fuel storage capacity by 10
better address the challenges pertaining to technical and
extra days and Sonora’s by 14 extra days. Considering an
nontechnical losses. Our business plan pillar is cemented
increased number of storage tanks will be available as we
on our financial strength. CFE’s significant financial losses
transition toward natural gas, we could practically double
pushed us to renegotiate the company’s collective labor
the country’s fuel storage capacity.
contract in 2016, reframing the utility’s pension system. Through an established incentive, we cut labor liabilities
On the operational side, we outlined the objective of a steady
in half, obtaining US$17 billion in savings. In the last three
reduction in energy loss. In 2012, these losses amounted to
years, we have reduced CFE’s indebtedness compared to
16 percent on average nationwide, versus OECD’s average
the previous year, a trend that will continue in 2018. While
of 6 percent. Our latest data from October 2017 suggests
CFE’s debt used to be issued entirely in US dollars in 2012,
our energy losses are below 12 percent. For 2018, we are
we now have a currency exchange exposure within a 20-30
setting a 10-11 percent objective. We are confident we can
percent threshold, guaranteeing the company’s financial
reach this milestone and will continue working to bring this
health during periods of high currency volatility, as we have
indicator closer to international standards. Some regions
recently experienced. CFE also managed to significantly
in the country are even below the 6 percent reference,
reduce operating costs, which decreased close to 13 percent
highlighting the challenge for Mexico’s central region.
between 2012 and 2016. The combination of all these factors
Each additional percentage point of efficiency is more
led to us to close 2016 with assets greater than US$26
complex than the last. CFE has also designed an ambitious
billion. We will persevere in our financial discipline and cost
investment plan. We continue investing in new generation
reduction agenda to attain a sustainable balance toward
plants, with seven of these under construction. The long-
2021. The reform confers CFE the possibility of participating
term electricity auctions organized by the Ministry of Energy
directly in the fossil fuels market. We established two
resulted in 52 new clean and renewable energy projects,
additional companies for that purpose, one in Mexico and
meaning one in every two states in Mexico will have a new
another in the US. Their primary objective is optimizing
plant powered by clean energy, helping us contribute to the
fuel supply for CFE’s own consumption and eventually
35 percent of clean energy by 2024 landmark. Renewable
commercializing these fuels to third parties. Close to 80
energy has considerable potential in the country, as it could
percent of the cost in electricity generation is associated
double the 55,000MW of installed capacity we have in the
with the fuels we use, making the gradual replacement of
coming years. Our investment portfolio is structured to
costly and highly contaminating fuels such as fuel oil and
allocate an estimated US$13 billion for the next five years.
