August 2, 2021 edition—X-Elio’s solar plans; AMLO’s LPG venture; and private oil production.
Last Week in a Minute or Less
Electric Power & Renewables. The CFE asked the CRE to stop permits; X-Elio will shine in Mexico; and TPI will help out Nordex.
Natural Gas Mid-Downstream & LNG. Carso enjoys CFE’s gas distribution.
Liquid Fuels Mid-Downstream. AMLO has the land for the new LPG venture; the Sener published an emergency guideline for LPG clients; and Ferromex and Ferrosur kept their fuel contracts with Pemex.
Oil & Gas Upstream. Private companies hit an oil production record.
Government & NGO. Moody’s lowered Pemex’s rating; Clouthier may increase import taxes; and Moody’s forecast 5.6% growth in 2021.
Déjà vu all over again. Last week’s readers were particularly interested in BP’s delivery (Platts – English); the Sur de Texas-Tuxpan pipeline’s busy work (Natural Gas Intel – English); and CFE’s debt (El Financiero – Spanish).
Geopolitics & Trade
Mexico is worried about farm and auto issues. The Economy Ministry met US authorities and discussed concerns regarding farm and auto issues (El Financiero – Spanish). The authorities also discussed the progress made in implementing labor reform in Mexico and agreed to keep a direct and constant dialogue.
The US is concerned with Mexico’s energy policy. The US State Department published a report on Mexico’s investment climate in 2021 saying that President López Obrador’s policies increase the cost of doing business in Mexico (El Financiero – Spanish).
Clouthier may increase import taxes. The Mexican government is studying the increase of import taxes on certain foods to help reduce inflation in the country (Forbes – Spanish). The goal is to increase market competition as was done with products such as chicken, pork, beef, and gas.
Mexico gets in the middle of the US and Cuba. President López Obrador asked President Biden to make a decision regarding Cuba’s embargo (El Economista – Spanish). AMLO said sending food and fuel to Cuba will not generate a conflict with the US (El Economista – Spanish).
Mexico sold less abroad. Mexico’s foreign trade lost energy due to manufacturing industry deliveries (El Financiero – Spanish). Foreign trade grew 0.3% in June compared to May. Oil exports increased 18.5% compared to May, and the drilling industry increased 20.1%.
BBVA increased Mexico’s growth forecast with caution. BBVA México increased the growth forecast from 4.7% to 6.3% for 2021, and from 2.8% to 3% for 2022 (El Financiero – Spanish). Nonetheless, the new forecasts will not recover to the levels seen before the pandemic.
Inflation reached 5.75% in July. In the first two weeks of July, inflation reached 5.75% due to the price of fuels, food, drinks, and tobacco (El Financiero – Spanish). Inflation is above Banxico’s goal for the ninth time.
Mexico’s tax evasion represents 6% of GDP. Tax evasion in Mexico reached MXN1.4bn, 6% of the GDP (Forbes – Spanish). According to Fixat, the amount recovered from fiscal credits in the first quarter of 2021 increased 10% compared to the same period in 2020.
CFE lost MXN14bn in the first half of the year. The state-owned company lost MXN14bn in the first half of 2021, 85.5% less than in the same period in 2020 (Forbes – Spanish). The reason is the stabilization and cut in production costs and financial risks of the direct debt.
Moody’s forecasts 5.6% growth in 2021. The international rating agency expects Mexico’s economic growth to reach 5.6% in 2021 and 2.9% in 2022, boosted by the US economic recovery (El Economista – Spanish). Moody’s said that Mexican salaries are contracting when considering inflation.
Legal & Regulatory
The CFE asked the CRE to stop giving out permits. The state-owned company asked the Energy Regulatory Commission to stop handing out generation permits for new wind and solar plants (El Economista – Spanish). According to experts, irregularities in the interconnection of the plants to the grid were the cause of December’s blackout.
AMLO has the land for the new LPG venture. President López Obrador said that the government already has the land for the LPG distribution plants and the cylinders and supply vans are being purchased (El Financiero – Spanish). Pemex will be in charge of the new company and will start operations in two months.
AMLO plans a new investment package. President López Obrador said that a new investment package for the private sector will be launched soon (El Financiero – Spanish). The projects will be related to the energy sector, communications, and other economic activities.
The Sener published an emergency guideline for LPG clients. Due to the “unjustified and excessive benefits” resulting from the liberalization of LPG prices (DOF – Spanish), the Energy Ministry established the basis to attend to the social problems this caused LP gas clients. The goal is to guarantee the well-being of Mexican families in their access to the fuel.
Ferromex and Ferrosur kept their fuel contracts with Pemex. Ferromex and Ferrosur maintained their diesel purchase contracts in Mexico with Pemex Transformación Industrial, so the supply is guaranteed for day-to-day operations (El Economista – Spanish). They have a total of 10 diesel suppliers.
BBVA believes renewables could attract investments. The bank said a change in the energy policy toward clean energies could mean a greater investment in the country (Forbes – Spanish). To have the supply chain closer, many US companies would rather invest in Mexico than in Asia.
Private companies hit an oil production record. Crude production by private companies in Mexico reached a new record of 70,000 barrels per day in June as Pemex struggles to stop the decline of its own output (Platts – English).
Moody’s lowered Pemex’s rating. Moody’s downgraded the state-owned company’s credit rating to Ba3 from Ba2 and maintained a negative outlook, which could signal future downgrades in the next year (Rio Times Online – English) (Forbes – Spanish). The decision is based on the state-owned oil company’s high liquidity risk.
Strategy & Operations
The AMIF has big plans for Nuevo León. The Mexican Association of the Solar Industry (AMIF) installed a second operation center in the country due to the position the state has in solar energy demand and the number of solar industry companies (PV Magazine – Spanish).
TPI will help out Nordex. Nordex will transfer the operation of its rotor blade plant in Matamoros to US wind blades specialist TPI Composites Inc. for three years under a collaboration deal (Renewables Now – English). The partnership would secure fast deliveries and high reliability.
X-Elio will shine in Mexico. The Spanish solar developer and operator closed a US$44.1m financing agreement for its Perote II solar project in Mexico (Renewables Now – English). The plant will have a 119MW capacity and be located in the Perote municipality.
Carso enjoys CFE’s gas distribution. The energy division of Grupo Carso had a positive performance thanks to the natural gas transportation lease to the state-owned company (Forbes – Spanish). In the first half of 2021, the subsidiary’s sales reached MXN1.4bn, a 250% increase compared to the same period in 2020.
The Dos Bocas refinery will be on top of a mangrove forest. The new refinery is being built on top of an area that the state-owned company pledged to protect, as the area was covered by a mangrove forest (El Financiero – Spanish). The Environment and Natural Resources Ministry handed Pemex a permit to develop oil reserves there if nothing was built in the area.
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May, 2022 in Mexico City.
The CFE and IMCO are fighting over a report. The Mexican Institute for Competition (IMCO) published a study accusing the state-owned company and its subsidiaries of distorting their financial states (PV Magazine – Spanish). The CFE accused IMCO of following the economic benefit of their members.
Quote of the Week
“Dadme una buena política y os daré mejores finanzas.”
“Give me good policies and I will give you better finances.”
– Mariano Arista (1802-1855), Mexican president from 15 January 1851 to 6 January 1853.
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