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Opportunities

in the Mexican
Electricity Sector
Global Strategy Group
Energy & Natural Resources

KPMG in Mexico
Contents
4 A new regulatory framework

4 - Background

5 - Pre-reform operating landscape

6 - Post-reform operating landscape

7 - Reform impact on new and


existing projects

8 - The unbundling of the Federal


Electricity Commission (CFE)

9 - Market players

9 - New market mechanisms

11 Investment opportunities

13 - Generation

16 - Transmission and distribution

17 - Supply

17 - Energy trading

18 Consumer opportunities

19 Market entry strategies

19 - Joint venture

21 - Participation purchase
in generation assets

21 - Green-field investment/
Acquisition

21 - Financing challenges
Opportunities in the Mexican Electricity Sector

22 Current situation

22 - First long term auction

23 - International clean energy


auction comparison
(mid and long-term)

24 Macroeconomic environment

25 - Gross Domestic Product

26 - Foreign direct investment

27 - Other indicators

28 Conclusions

29 Global Strategy Group services in


the electricity sector

31 About GSG

31 About ENR

3
A new regulatory framework
Background on one hand, allows the productive
sector to acquire electricity at
competitive prices from a wholesale
b. The nuclear power generation

c. The electricity transmission


Before the Energy Reform, Mexico electricity market and to have a legal and distribution
had a traditional industry model where framework that allows regulators to
a vertically integrated State agency, develop such market efficiently and 2. Unbundling of the industrial chain,
the Federal Electricity Commission competitively and, on the other hand, into its different links: (i) generation,
(CFE), was responsible for developing gives strength and thrust to a power (ii) transmission, (iii) distribution,
all activities of the power industrial chain, industry with huge challenges ahead, and (iv) supply
from energy generation to delivery by attracting private resources
to end users. This model allowed, for development. 3. Allow: (i) direct private investment
as an exception, the participation of in electricity generation and trade,
private generators in those activities that The new industry organization is creating a wholesale electricity
the law did not consider a public service. similar to the wholesale electricity market, and (ii) private investment
market models established around through partnerships or contracts
Technological change in the global the world since the early nineties entered into with the Mexican
power industry and the rigidity of of the last century. State regarding finance, installation,
the model, among other factors, maintenance, management,
led to various inefficiencies in the The principles governing the operation and expansion of the
system which, in turn, resulted in restructuring are: transmission and distribution grids
higher electricity costs, significantly
impacting the competitiveness 1. It remains as strategic activities
of the domestic productive sector. exclusive to the Mexican State:

The reform seeks to establish a. The planning and control of the


a new industrial organization that, National Electric System (SEN)

4
Opportunities in the Mexican Electricity Sector

Pre-reform operating landscape


Industry structure
Before the Energy Reform, the industry Independent Energy Production Small production
maintained a vertically integrated state
Self-supply Import
monopoly operated by CFE; with private
generators operating on a limited basis in: Cogeneration Export

The private sector could generate Using Self-supply and


electricity as External Energy Cogeneration permits, for the Before the Energy Reform,
Producer if, and only if: procurement of the generators
own energy needs or the
Mexico had a traditional
The energy produced was destined companys self-supply needs, industry model where
for its own consumption and in case of production
surpluses for exclusive
a vertically integrated
Intended for exports or direct sale to CFE State agency, the Federal
sale to CFE
Using import permits for self-
Electricity Commission
The generator has a permit consumption, and export permits (CFE), was responsible
awarded from the Energy
Regulatory Commission (CRE)
through independent production,
cogeneration and small production
for developing all activities
of the power industrial chain,
Using an Independent Energy
Production or Small Production
from energy generation to
permit, for exclusive sale to CFE delivery to end users
or for exports

5
Post-reform operating landscape
New market structure that best suits their needs, inevitably
After the Energy Reform, the market forcing an eventual reduction in prices,
was liberalized for the generation beneficial to all stakeholders.
and supply of electricity; CFE
now becomes a competitor in The electricity transmission and
the marketplace to operate under distribution public service remains
a competitive environment and reserved for the Mexican State.
private investors will be able Notwithstanding the foregoing,
to install new power plants. the law stipulates that the State
may enter into contracts or
The new market structure allows partnerships with the private
for large energy consumers to sector for the operation of the
satisfy their electricity needs from transmission and distribution grids.
an array of options available, marking
a threshold for CFEs historic A new operative framework is
monopoly in the consumer sector created where new products and
of the value chain. Qualified Users market mechanisms are introduced
and Market Participant Qualified to incentivize investment in new
Users may participate in a competitive energy generation, transmission and
environment to select the provider distribution, and supply to final users.

Broker
Basic and qualified supplier
(CFE and privates)
Operated by the State S

Basic user

Qualified user

Generator Qualified user / Market


(CFE and privates) participant qualified user

Market participants

6
Opportunities in the Mexican Electricity Sector

Reform impact on new


and existing projects
Permits and contracts under to participate in the new markets.
the previous regime (legacy) Additionally, once an existing private
have the option of maintaining their generator has decided to migrate to
pre-reform status (including benefits the new regime, it has a grace period
and obligations) or migrate (totally or of 5 years to return to its previous
partially) to the new scheme in order regulatory framework.

Legacy contracts Contracts under


(previous regime) the new law

Existing power generators ruled New projects governed by the Electric


under the previous regime have Industry Law (LIE) will participate in
the option of migrating to the new long- and mid-term auctions, as well
law or of maintaining the existing as short-term markets.
benefits and obligations.

Furthermore, legacy utilities Projects that are in a pre-


may transfer a portion of their construction or construction
plant capacity to the new Electric stage are able to participate in
Industry Law to participate in long-term auctions, allowing
long- and mid-term auctions, them to secure a stable income
as well as short-term markets. before starting its operations.

These players have the option New products are introduced,


of bidding in long-term auctions such as clean energy certificates,
and then migrating to the new financial transfer rights, and
market framework, only if they ancillary services.
are awarded a contract.

The new Wholesale Electricity Market move their contracts to the


in Mexico was designed to incentivize new regime, based on the new
and give numerous benefits to both market mechanisms, products,
new and existing participants that and operating structure.

7
The unbundling of the Federal Electricity
Commission (CFE)
On January 2016, SENER published The terms establish that CFE This is one of the main reasons why a
on the Official Gazette, the terms may continue carrying out the correct and successful unbundling of CFE
under which CFE must be unbundled. aforementioned activities directly, is crucial to a correct implementation of
These terms include the separation of CFE including the participation in the a new market structure that will provide
on to companies with activities that shall Wholesale Electricity Market, until six tangible incentives to private investors for
be strictly carried out, independently of months after the official publishing of participating in the new Mexican market.
each another, and categorized as follows: the unbundling terms. This means that
as of June 28, 2016, CFE has to be fully
Announced CFE
Generation unbundled and operating independently
investments
Transmission of each of its divided companies.
Project Value
Distribution This unbundling seeks to minimize
Basic Supply CFEs inherited market power and 11 natural gas
USD5.2 billion
create a competitive environment pipelines
Commercialization other than
that allows new entrants to
Basic Supply
participate under fair conditions. 7 thermoelectric
Procurement of Primary Inputs plant conversions USD200 million

During 2015, CFE served a total of


Additionally, CFE may establish other 39.6 million customers out of which 7 combined cycle
subsidiaries as it considers necessary. 88.6% are grouped in the domestic power plants USD6 billion
sector and account for around 20% of
Furthermore, Mexicos Ministry of the national consumption. Additionally,
15 renewable
Energy (SENER) established that, CFE owns a total of 41,915 MW of USD4.8 billion
generation projects
under the Generation activity, CFE must installed capacity, which corresponds
constitute at least 6 different companies to 61.6% of the total installed capacity
A combination of
that operate its electric utilities. These in the market, and controls another
7 transmission lines
utilities will be assigned to CFE in equal 12,953 MW through contracts with IPPs, USD1 billion
and 9 distribution
measures, taking into account financial while the remainder belongs to private projects
sustainability, technology mix, efficiency, companies according to the activities
and assets useful life. allowed under the previous regime. Source: CFE website.

8
Opportunities in the Mexican Electricity Sector

New market
Market players mechanisms
Represent one or more plants
Long-Term Auctions
Generators Long-term auctions, reserved for clean technologies, provide new
and and, in the case of intermediary
and existing generation projects with a stable income for 15-20
Intermediary generators, represent plants
years. Projects in a pre-construction or construction stage are
Generators under the previous regime.
entitled to participate in these auctions, providing certainty over the
return of an investment; exclusively designed (for clean technology
plants conventional utilities may participate only with capacity).
Basic Represents load centers
Service corresponding to basic
While participating in auctions, the generators submit Sale
Supplier service users.
Offers specifying the desired income for each product,
which consists of a product package. If the package is
Qualified Represents load centers assigned, the bidder will receive the requested income
Supplier corresponding to qualified users for each product over the contract term (15 and 20 years):
that do not participate directly in
the Wholesale Electricity Market. Energy 15 years
Capacity 15 years
Clean Energy Certificates (CEL) 20 years
Basic Final user that receives energy
Service procurement from a Basic Generators can decide the amount of its total energy to
User Service Supplier. offer in these auctions and may reserve the remaining to
participate using other mechanisms.

Qualified Final user that receives energy This market mechanism reduces investment risks as power
User procurement from a Qualified generators secure a stable income that enables them to
Supplier. Estimated demand recover their variable and fixed costs, even when the electric
must be larger than 2 MW for utility is not yet built.
2016 and 1 MW for 2017.
On the consumer side of the spectrum, long-term auctions
are designed to secure a stable price for Basic Supply
Market Represents load centers for own Users, although participation is not limited to these, while
Participant consumption or for consumption Qualified Suppliers are entitled to participate under the
Qualified within its facilities. Procures established conditions.
User electricity and related products
directly in the market, without Tenders for these auctions are based on a long-term demand
any need of being represented estimate, which will be then met with real demand as the
by a Supplier. mid-term auctions and short-term markets take place.

Mid-Term Auctions
Last Resort Represents qualified users for a Mid-term auctions include Energy and Capacity products
supplier given period of time, usually under to be offered by generators, which result in binding contracts
emergency grid situations. for a 3-year term. In mid-term auctions, all technologies are
entitled to participate, including fossil fuel generation.

Non-supplying Commercializes energy in the Both long-term and mid-term auctions are designed to
broker wholesale market without ensure a stable price for Basic User Suppliers and avoid
representing physical assets. their exposure to price volatility. However, Qualified User
Suppliers are entitled to participate if they decide so.

9
Short-Term Markets Day-Ahead Market: The Day-Ahead It will allow a supplementary energy
In short-term markets, utilities Market (DAM) allows both generators and ancillary services procurement
are assigned through an economic and suppliers to acquire energy and upon estimated demand changes an
dispatch model, where most related products in order to balance their hour before beginning the operation
efficient (clean) plants are assigned long and mid-term demand estimates day, for every hour of operation.
accordingly until the total demand from their revised short-term estimates.
is met at a given point in time. Market participants may submit offer/ Real-Time Market: The Real-Time
purchase bids up to 10 a.m. on the Market (RTM) adjusts the estimated
The last plant dispatched in order day prior to the operation day: demand in the day-ahead market from real
to cover demand sets the location time demand, allowing market participants
marginal price (LMP), determined First Market Stage: Bidders to submit hourly bids for energy and
by its variable and maintenance will submit a fixed-sale bid, ancillary services, at least fifteen minutes
costs, which also varies according specifying only the quantity before each operating hour.
to the generation technology. This (in MW) and location (node)
LMP will be paid per megawatt The main challenges for electric
to every generator assigned, Second Market Stage (2018): generators are their energy placement
regardless of its own costs. Bidders will submit a price- on the market, given the existence of
sensitive bid, specifying quantity numerous markets with a certain
This new market mechanism and price per hour ($/MWh), degree of complexity. These are
is designed to incentivize new minimum daily energy limit, designed to be traded based on final
investment in clean energy ramp capacity, notification users demand estimates from
generation, given the larger profit timeframe, and location long to short term, allowing users
margins obtained from efficient to make an efficient planning of their
plants rather than plants that use Hour-Ahead Market: The Hour-Ahead consumption and to secure rates
fossil fuels and represent higher Market (HAM) will be implemented in order to make their estimated
operating costs. up to the second market stage. expenses more predictable.

Long-term
Auctions and
Bilateral Mid-Term
Transactions Auctions
DAM
HAM
RTM

Note: DAM: Day-Ahead Market, HAM: Hour-Ahead Market, RTM: Real-Time Market.

10
Opportunities in the Mexican Electricity Sector

Investment opportunities
The Energy Reform implemented in
Mexico since January 2016, involves Situation by the end of 2015 2030 forecast
a process of change that will create a
market comprised of independent
generation, transmission, distribution
and commercialization companies. Installed capacity: 57 GW of new and
Particularly, in the generation and 68 Gigawatts (GW) replacement capacity
commercialization activities, the market
will be open to the private sector.
Market participants ought to fully Generation: 309,553 GWh; At least 517,000 GWh; clients will
understand its new legal, regulatory reaching 39.6 million clients reach 50 million
and commercial framework to be able
to take advantage of the operational as
well as business opportunities it brings.
Transmission grid: 104,393 km. Transmission grid: 25,000 additional
Distribution grid: 775,483 km.; km. Distribution grid and the
Future development
Substations and transformers installed capacity of substations
of the sector
installed capacity: 55,464 and transformers should grow in
The Wholesale Electricity Market has
Megavolts ampere (MVA) the same proportion, given that
a wider growth perspective given
current networks are insufficient
the countrys lag to adopt a structural
to absorb generation growth
reform in the Energy Sector. However,
this represents a strong competitive
advantage as the market has been
designed copying the international best Non-fossil generation accounted for Non-fossil generation should
practices, which reduces the risks of 20% of Mexicos electricity supply account for 41% of total supply
committing past regulatory mistakes.

11
Expected investment in the Estimated investment 2016-2030
electricity sector 2016-2030 in US billion
During the next 15 years, it is $14
estimated that Mexico will require
$12 $1.1
a total investment of USD123.4 $1.6
$1.0
billion in electricity infrastructure $10
$1.7
$1.9 $1.3
$0.9
in order to achieve the goals set by $0.9
$1.9 $1.4 $1.1 $1.0
the government. Out of the total $8 $1.0 $0.7
$0.9 $0.6 $0.5
investment, 75% will correspond $0.8
$6 $10.5 $1.0 $0.9 $0.9
to investment in generation $9.5 $1.0 $0.9 $0.9 $0.7
$8.6
infrastructure, equivalent to $4 $7.7 $1.3 $7.1 $7.1
$7.1 $0.8 $0.9 $6.7
USD92.5 billion from 2016 to 2030. $0.7 $0.7 $5.6
$4.6 $5.0 $4.8
$2 $3.3
$2.4 $2.5
$0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Generation Transmission Distribution
*Considering an exchange rate of $18.2MXN/USD.

Source: PRODESEN 2016.

12
Opportunities in the Mexican Electricity Sector

Generation
Clean Energy Generation Clean Energy Generation Goals in Mexico
In recent years, international governmental
and non-governmental bodies have 600,000 41% 45%
strived to introduce policy programs that 40%
500,000
set out a framework for action to reduce
Gigawatts-hour
35%
35%
greenhouse gas emissions. The COP21 400,000 30%
25% 312,346
talks in Paris are a strong example of 25%
300,000
worldwide efforts being made to take 254,639 20%
action on climate change. 200,000 237,752 15%

217,054 10%
In parallel to the efforts made around the 100,000
137,114 5%
79,251
world to secure a cleaner environment, 0 0%
the Energy Reform in Mexico, along 2018 2024 2028
with its secondary laws, seeks to
Clean generation Fossil generation Clean generation percentage
reach goals on the matter by setting
a minimum percentage of electricity
Note: Based on electricity generation estimates.
generation from clean sources. Source: Energy Transition Law and Renewable Energy Prospective 2014.

Market participants on the supply- of clean generation and fossil fuel


side of the Electric Market are generation, without resulting in excessive
required to acquire a certain revenues for clean energy generators.
percentage of their energy from It is expected that clean sources will
clean sources. Basic and Qualified become more competitive in the medium
Users suppliers must acquire term, reducing the price of CELs and, in
at least 5% of their energy from turn, lowering the cost of achieving the During the next 15 years,
clean sources in 2018 and 5.8%
in 2019. Failing to comply with
clean energy generation objectives.1
Mexico will require a
these standards will result in In 2015, 20.3% of total energy total investment of
costly penalties per megawatt-hour
(MWh) not acquired.
generation was produced through
clean sources2. According to
USD130.5 billion in electricity
the Ministry of Energy (SENER), infrastructure in order to
According to Jesus Serrano,
Commissioner at CRE (Energy
at least 62% of the new installed
capacity from 2016 to 2030
achieve the goals set by the
Regulatory Commission), CELs will consist of investment in clean government, with 97.9 billion
provide clean energy technologies
with the necessary resources
energy technologies. This represents
an important opportunity for
corresponding to generation
to make them more competitive. private investors due to the
The market will determine the countrys energy needs and
price of CELs, which will cover the clean energy goals established
the difference between the costs by the Mexican government.

1 Mexico Energy and Sustainability Review 2015.

2 It includes large-scale hydro and nuclear energies, which in other markets are not considered clean sources.

13
Clean Energy Investment Cumulative Global Solar PV Development and Module Prices
2016-2030 USD/Wp and installed capacity (GW)
$5.0 $4.7 $4.5 $5.0
$4.4 4.40
$4.1 $4.1 $4.2
1.88% $3.8 $4.0
8.47% $4.0 $3.6 3.50 $4.0
29.35% $3.1
9.27% $3.0 2.40 $3.0
$2.2 1.75
USD 73.1 $1.7
billion $2.0 $2.0
1.00 $0.9 $0.09 $0.08
25.45% $1.0 0.40 0.60 $1.0
25.46% 0.15 0.20 0.30
0.01 0.02 0.03 0.05 0.10
$ $
Wind Hydro Global average c-Si module selling price Solar PV cumulative installed capacity (GW)
Solar PV Geothermal
Nuclear Bioenergy (0.08%) Source: IRENA (International Renewable Energy Agency) Renewable Cost Database.
CHP Thermal solar (0.05%)
Wind turbine prices declined by almost Natural Gas
one third over the same period. This As investment in clean technology
technology has become one of the most increases, less efficient plants
Conventional Energy competitive technologies available, mostly will be gradually displaced out
Investment 2016-2030 due to technology improvements and the of the market, causing a larger
1.92% 1.09% continued reduction of installation costs reliance on natural gas-fired plants.
2.68% over the past years. According to IRENA This is because gas is the fastest
(International Renewable Energy Agency), growing fossil fuel, supported by
onshore wind projects are now within its high efficiency levels, relatively
USD 19.1 the same, or even lower, cost range than low emissions compared to other
billion fossil fuels. The best wind projects around fossil fuels, current relatively lower
the world are consistently delivering costs in North America and its
94.27% electricity for USD0.05/kWh without any strong reliability.
financial support.
By 2015, there was a total of 63
Combined cycle Turbogas
Thermoelectric Carbon (0.05%) In opinion of Cesar Hernandez Ochoa, Combined Cycle utilities in Mexico,
Internal combustion Undersecretary of Electricity at the primarily grouped in the Northern
Ministry of Energy, Over the past two and Gulf regions of the country.
years, both electricity generation from
The new market is designed to natural gas and renewable have grown The total installed capacity for these
incentivize investment in new clean by 10% compared with the previous plants summed 24,961 MW with
generation technologies, via the two years, gradually displacing fuel oil. an estimated annual generation
mechanisms discussed before. It is a tendency that will continue.3 of 155,167 GWh.
Furthermore, clean energy certificates
provide an additional income to clean Combined Cycle Installed Capacity, 2015
generators independently from their
energy and capacity income.
Sonora Coahuila
Additionally, renewable technology Chihuahua
Baja California
costs have been dramatically reduced Nuevo Leon
Tamaulipas
over the past few years on a global
Durango Guanajuato
scale, which makes these technologies Queretaro
a much more viable investment than SLP
Hidalgo

in the past. Such is the case of Solar Estado


de Mexico
PV plants, which became 75% percent 1,000 MW Veracruz
Colima
cheaper in 2014 compared to 2009. 100 MW Campeche
< 100 MW Tlaxcala
Puebla

3 IBID. Source: Development Program for the National Electric System (PRODESEN) 2016-2029.

14
Opportunities in the Mexican Electricity Sector

According to SENER, out of the storage capacity have increased The natural gas pipeline construction
estimated 21,598.7 GW of new the risk of supply disruptions. program must progress rapidly, as well
installed capacity in Mexico for as their interconnection facilities to
conventional technologies from In 2012, the use of natural gas in electricity appropriate U.S. hubs. This will allow
2016 to 2030, 94.7% will come generation passed the 50 percent Mexico to fully benefit from available
from Combined Cycle utilities threshold and this share will continue low-cost supply and make the most
(excluding clean technology). to expand rapidly as the pipeline grid is of unique logistical advantages.
extended and new power plants are built.
This projected growth for natural As the gasification program progresses, U.S. pipeline exports of natural gas
gas-powered utilities places the natural gas will totally displace fuel-oil to Mexico has doubled between 2009
development of pipeline infrastructure in power generation assuming that gas and 2013. SENER estimates that U.S.
as one of the top investment priorities prices remain relatively constant. pipeline exports to Mexico will reach
in the upcoming years. 3.8 billion cubic feet per day (Bcf/d) in
According to David Madero, General 2018. Such increase would represent
Mexicos midstream has suffered after Director of CENAGAS (National Natural more than double U.S. pipeline exports
years of underinvestment. Transport Gas Control Center, Mexico is shifting to Mexico in 2013, which averaged
constraints due to pipeline bottlenecks from liquid fuels to natural gas for 1.8 Bcf/d. This projected growth
have provoked a crisis in natural gas electricity generation, making gas security is mainly driven by higher demand
supply and inadequate transport and a crucial element in the energy industry.4 from Mexicos electric power sector.

Five-Year Plan CENAGAS Tenders

Los Algodones 2012 2016 2019 LNG regasification terminal


Sasabe Gas pipeline in operation
San Isidro
Samalayuca Concluded gas pipeline (2013/2014/2015)
Puerto
Libertad
Gas pipeline in construction (2015/2016)
El Encino Strategic gas pipeline included in Five Year Plan
Colombia

Guaymas Compression Station El Cabritoincluded Five Year Plan


Camargo
La Laguna
El oro
Los Ramones
Social coverage pipeline included Five Year Plan
Topolobampo
Escobedo
Durango

Mazatln Zacatecas
San
Luis Altamira
Estimated Investment:
Aguascalientes Potos
V. Reyesnc h a le Naranjos 10+ billion USD
zu Tuxpan
ma
Guadalajara Ta
Tula
Apaseo el Alto Nativitas
Cempoala
Ciudad
According to the Gas Pipelines Five
Huexca
Lazaro Cardenas Pemex Year Plan, Mexico will have the following
Jaltipan
Nuevo infrastructure by 2019:
Acapulco Pemex
To Central
Salina Cruz America
10 new strategic gas pipelines
Tapachula
Around 5,000 6,000 kilometers
of pipelines
Source: KPMG analysis with information from Mexicos Ministry of Energy (SENER). Available in Spanish at: 7 interconnections with the USA
http://www.gob.mx/sener/acciones-y-programas/plan-quinquenal-de-gas-natural-2015-2019
Connect the Eastern and
Western Mexico

4 IBID.
Bring gas to new locations

15
Transmission and distribution
The electricity transmission and Objective 2: Connect the National Will run between the south-western
distribution remains reserved for Transmission Network (RNT) with state of Oaxaca and the State of
the Mexican State through CFE. North and Central America Morelos (near Mexico City)
However, the law stipulates that It will be the first DC circuit
the State may grant open access Objective 3: Serve all electricity in the country
to all market participants and can supply and demand needs By 2Q16, the CFE will launch the
enter into contracts and partnerships first call for tender of the 25-year,
for the operation of the transmission Moreover, 3 objectives were USD1.2 bn APP contract
and distribution grids. set for the development of the
Distribution network, as follows: The contract execution is
In opinion of Eduardo Meraz, General scheduled to take place
Director of CENACE (National Energy Objective 1: Serve all electricity towards the end of 2016
Control Center), The challenge will supply and demand needs:
be to provide enough transmission The second project:
infrastructure so that generators Expand coverage, modernize
do not have to fight over the grid in the National Distribution Network, 25 km of submarine
order to reach consumption points. reducing energy losses transmission lines with 12.5 km
Congestion will be minimized through of distribution lines
proper plans to expand the grid.5 Objective 2: Extend the Will run between Playa del Carmen
distribution service: and Cancun in the Southeast state
Private-public co-investment with of Quintana Roo
CFE is possible and necessary under Foster Distributed Generation
the new regulatory framework, in An estimated cost of USD240m;
order to develop the grids required Objective 3: Incorporate state-of-the- it would also be a 25-year PPP
infrastructure in Transmission art technological systems: The tender is scheduled to be
and Distribution, according the launched before the end of 2016
national development program. The Smart grids, Advanced Metering
development of a solid grid will be Infrastructure (AMI), SCADA and Both lines should start operation in
crucial to avoid system bottle necks EPROSEC systems 2019. The capex costs for the lines will
which, in turn, leads to a rise in be covered by the sponsors. The winning
electricity prices for certain nodes. As SENER has announced that this bidder will receive annual payments
generation installed capacity in the year will tender two transmission lines based on their requested transmission
country increases, private-public co- with a combined length of 1,225km rate. In the competitive tender process,
investment in the electric grid will be and a total cost of USD1.44 billion. the contract will be awarded to the bidder
required at the same pace. The projects will be awarded as that proposes the minimum annual
Public Private Partnership contracts payment alongside the other technical
PRODESEN 2016 points out 3 general (APP) in international public tenders. and economic requirements.
objectives regarding Transmission
infrastructure development: The first project:

Objective 1: Connect the National 1,200 km of 3,000 MW direct


Interconnected System (SIN) with current (DC) trunk lines with
Baja Californias isolated System 600km of distribution lines

5 IBID.

16
Opportunities in the Mexican Electricity Sector

Supply Energy trading


Private companies may compete directly The energy sectors liberalization allows
against CFEs supply load centers in final users to meet their energy needs
a competitive environment. CFEs along with suppliers mentioned earlier
inherited inefficiencies for its long- through private and independent brokers
lived electric utilities could provide a (non-supply brokers). This allows final
competitive advantage to new private users to acquire energy, clean energy
suppliers who may offer a lower certificates and ancillary services
market price when representing clean at competitive market prices, while
technologies. offering attractive returns to generators.

Basic Service Suppliers: Provide The non-supply broker figure allows the
energy and ancillary services to basic physical and financial trading of energy
service users, and represent exempt and ancillary services on the wholesale
generators that request it. electric market representing one or
several generators in the market.
Qualified Suppliers: Qualified suppliers
provide energy and ancillary services In short term markets, the broker
to users whose consumption surpasses receives economic offers from
3 MW in 2015, 2 MW in 2016, and 1 generators in real time, depending
MW in 2017. on their capacities and operating costs.

However, on the mid and long-terms,


the broker analyzes the current
contracts of each client, identifies
opportunities and seeks to renegotiate
contractual terms, or obtains better
options on the short-term market.

17
Consumer opportunities
Previous to the Energy Reform, all consumers were available, creating a competitive environment in the
required to meet their electricity needs through the supply value chain and allowing potential savings to these
state-owned Federal Energy Commission. This scheme consumers. This will allow the final supply of electricity to
caused consumer dependence on CFEs established prices users to be defined by prices in open market conditions.
for energy, with CFE having few incentives to improve Participants may select the provider that best suits their
electricity generation efficiency. needs or participate directly in the market if they fulfil
the requirements to do so. The following options could
The new market structure allows large energy consumers represent an attractive alternative to the traditional supply
to satisfy their electricity needs from an array of options model, depending on each consumers specific needs:

Direct investment in generation plant Direct participation in


Wholesale Electric Market
Market scheme: Generator Market scheme: Market participant qualified user

Pros Cons Pros Cons


Guaranteed energy through Ability to participate in
a self-owned plant High investment required Specialized energy
procuring energy at market
Fixed energy price Specialized energy team prices team required
required Market price volatility
Lower-than-market price Variety of generators to
Penalties for deviations in select from Minimum 5 MW and
Sale of energy surpluses in generation (not supplying in 20 GWh demand required
the Wholesale Electric Market the market when assigned) Control over decision
making in energy to obtain permit
procurement

Energy supply through a Qualified Supplier Electric coverage contract

Market scheme: Qualified User Market scheme: Market Participant

Pros Cons Pros Cons

No specialized team No investment required


in trading required Low control over prices Requires contract with
Secures a fixed price for CENACE
Avoids penalties for deviations Supplier may charge a defined timeline (subject
(generator pool) a handling fee to volatility in primary Uncertainty over the future
inputs if applicable) evolution of market prices
Demand response services
(load following) Energy supply through the Limited renegotiation of
generator that best adapts contracted terms upon change
Seeks to offer lower-than- to the consumers needs in market price reference
market price (spot reference)

Other alternatives include a Distributed Generation The appropriate option for each user will depend on its
scheme, which implies installing a smaller than 0.5 MW infrastructure, electricity consumption evolution and potential
plant within the final users facilities, which is used to savings (as % of all its costs) as well as willingness to invest in
supply the consumers own energy needs. These plants its own generation assets and electricity trading teams. The final
do not require a Generation permit by CRE, and energy objective for a qualified user beyond reducing its costs should be
surpluses may be sold through a registered Supplier. to lock in medium to long term rates to facilitate its planning.

18
Opportunities in the Mexican Electricity Sector

Market entry strategies


Due to the market liberalization, investment in Mexico will significantly increase in the next years (see page 12),
which will in turn provide numerous investment options for both investors and operators.

Joint venture
Players with operating utilities in the country:

According to the operating manuals, electric generators may create


consortiums to participate in auctions in a way that they can offer attractive
product packages according to the generators and auctions requirements

Pros Cons

Synergies from both players to be Difficult integration from


more competitive in the market both organizations

Risk reduction Lower returns

19
The placement of energy on the different market mechanisms may become
a complex task to generators who arent familiarized with the new operating
structure and market rules. Therefore, a joint venture with an energy brokerage
firm that handles the sale of energy may be an attractive option, given that the
generator avoids the development of an internal energy sales team and may
centralize its operations to electricity generation

Pros Cons

Efforts centered only on Few internal control on


operation commercialization

Assured energy placement


based on brokers generation
and client portfolio

Players with no participation in the Mexican market:

Given the complexity of the Mexican regulation and differentiation from


other markets around the world, foreign investors may decide to create joint
ventures with companies which have projects in a development or pre-
construction stage. The added value that each party provides, centers on
the combination of technical, relational and local business knowledge from
one end, and financial capabilities from the other

Furthermore, the lack of previous experience in project development from


a Mexican Enterprise may also be supplemented by a partner who provides
experience and know-how in the development stage

Pros Cons

A thorough understanding of
Know-how exchange
doing business in Mexico

Risk evaluation and project


Synergy from both parties
feasibility study required

Due to the market liberalization, investment in Mexico


will significantly increase in the next years (see page 12),
which will in turn provide numerous investment options
for both investors and operators

20
Opportunities in the Mexican Electricity Sector

Participation purchase in Financing


generation assets challenges
Direct investment may be a feasible option for global corporations with a large One of the main challenges in the
project portfolios in electric utilities and energy infrastructure development of new generation
projects under the reformed market
This option requires a high investment expenditure and an extensive market will be project financing. New markets
knowledge in the current operating markets complexity makes it difficult for banks
to fund an energy project with the
Several of the largest energy-consuming corporations have already or are uncertainty as to how the market will
considering to invest in the country directly in electric utilities. This allows develop and the degree of success on
them to self-supply their energy needs and avoid market price volatility the Energy Reform implementation.

Unless long-term bilateral contracts


Pros Cons have been executed for a project under
development or a considerable amount
Energy procurement without High investment with of energy has been placed in long term
price volatility slow recovery auctions, banks are currently considering
the electricity market a high risk taking into
account, nowadays, very little reference

Green-field investment/
exists on how the energy prices will
transform over time which in turn makes
revenue prediction extremely difficult.

Acquisition However, according to Ivan Oliveros,


Latin America Project Finance Director
and Renewable Energy Lead at SMBC6,
a hybrid project with a maximum
Its common for investors seeking to acquire existing generation Projects either participation of 20% in the short-term
in operation or in a development stage. Risks for these entries are low given the markets and the rest in either long and
market mechanisms that allow a stable long-term return over investment. The mid-term auctions or bilateral contracts,
required investment, however, is significantly high significantly reduces the uncertainty risk
and provides a higher degree of probability
With long-term auctions, Greenfield or clean utilities acquired become attractive as the to receive funding.
sale of products (energy, capacity and CELs) is assured for a period of 15 to 20 years
Clean Energy Certificates and the
Given the market is currently in an early maturing stage, growth in generation Capacity Market significantly reduce
assets will be on the rise in the next years, which becomes economically banking risks as well, given the income
attractive to invest in them certainty over the long term. In opinion
of Noe Navarrete, Commissioner at CRE,
New law allows for bilateral contracts, so
Pros Cons
a generator can enter into a contract with
Low commercial risk Higher investment a supplier that will enable both parties to
leverage their investments. In addition, a
Growing market Regulatory uncertainties tender for CELs with a ten-year duration
makes any project bankable. The most
attractive scheme today is capacity bids for
6 Sumitomo Mitsui Banking Corporation, 4th Mexico Electric Power Summit.
ten-year contracts, since the tenders are
7 Mexico Energy and Sustainability Review.
designed to make projects bankable.7

21
Current situation
First long SunPower Systems
Mxico S. de R.L.
de C.V.
Enel Green Power
Mxico S. de R.L.
de C.V.
Enel Green Power
Mxico S. de R.L.
de C.V.
Enel Green Power
Mxico S. de R.L.
de C.V.

term auction Guanajuato


Cap. MW: 100

Energa Renovable
de la Pennsula
Coahuila
Cap. MW: 330

Recurrent Energy
Mexico Development
Coahuila
Cap. MW: 250

Aldesa Energias
Renovables S.L.U.
Guanajuato
Cap. MW: 207

Aldesa Energias
Renovables S.L.U.
S.A.P.I de C.V. S. de R.L. de C.V. Yucatn Yucatn
The first long term auction in the new Yucatn Aguascalientes Cap. MW: 30 Cap. MW: 30
Cap. MW: 90 Cap. MW: 63
Wholesale Electric Market received
significant interest from private
generators, where more than 460
technical offers were submitted by 103
bidders, out of which 18 offers were Wind
selected correspondent to 11 bidders.
Coahuila
Solar PV
Average prices assigned
Out of the 5,402 GWh of electricity
and 5.38 million CELs assigned,
Baja
an average price of USD45.48 per
California Tamaulipas
package (MWh + CEL) was obtained Sur Ags.
in the first long term auction, where
74% of the energy corresponded to
Solar PV projects and the remaining
Yucatn
26% to Wind projects: Jalisco
Guanajuato

Wind: USD55.39/MWh+CEL
Consorcio Energa Energa Renovable Photoemer is Sol de Insurgentes
Limpia 2010 del Istmo II Sustentable S. de R.L. de C.V.
Solar: USD45.15/MWh+CEL Yucatn Tamaulipas S.A. de C.V. Baja California Sur
Cap. MW: 76 Cap. MW: 168 Yucatn Cap. MW: 23
Cap. MW: 30

Jinkosolar Jinkosolar Jinkosolar Vega Solar 1 S.A.P.I


No capacity was assigned in the first Investment Investment Pte. Investment de C.V.
2015 Long-Term Auction, as no bidders Pte. Ltd. Ltd. Pte. Ltd. Yucatn
Yucatn Yucatn Jalisco Cap. MW: 500
presented an offer for CFEs MXN10,000 Cap. MW: 18 Cap. MW: 70 Cap. MW: 100
max purchase price offer, which seemed
too low for most participants.
Mexicos first long term auction has shown a clear sign of tangible efforts
The assigned projects will supply towards more competitive prices in the market, even when compared to
15 years of electricity and 20 years other countries around the world (see the map below), and a shift towards
of clean energy certificates to CFEs a cleaner technology mix by designing auctions where the most efficient
Basic Service Supply subsidiary. plants (and thus cheaper) are assigned.

22
Opportunities in the Mexican Electricity Sector

International clean energy auction


comparison (mid and long-term)
USD/MWh Germany Germany Key: Wind Solar
$67-100 $96

Canada
$66

China
$80-91
Mexico
$55 Turkey
USA Mexico $73
$47 $45 Jordan
USA $61-77
$65-70
India
$80-116
El
Salvador
$101-123
Brazil UAE
2000: $92-117 $68
Peru 2010: $86-94
$70 2014: $49
Peru Chile Egypt
$120 $85-89 $41-50

Uruguay South Africa South Africa Australia


Source: Mexicos Ministry of Energy (SENER). $90 $61 $65 $89

During the second 2016 Long Term Auction, CFE has presented its purchase CFE capacity purchase bid
bid, with maximum prices being 15% lower compared to the 2015 auction In USD/MW
for Energy and CELs, but over 168 times higher for capacity, showing a clear
93,000 $92,786.0
sign of interest in new investment in electric power plants.
92,000
CFE Energy and CEL purchase bid 91,000
In USD/MWh and USD/CEL 2015 auction
90,000
$48.6 2016 auction
50 89,000
45 $41.2 -15.1%
40
35 +16,787.1%
30 $24.4 $20.6 5,000
25
-15.5%
20 4,000
15
3,000
10
5 2,000
0
Energy CELs 2015 auction 1,000 $549.5
2016 auction
Assuming an exchange rate of 18.2MXN/USD. 0
Capacity

23
Macroeconomic environment
Energy consumption is a primary input for the development of productive activities
and the countrys development, which has a direct impact on economic growth.
It is also an indispensable good for the population, which makes the continuous
and reliable supply of electricity a crucial activity.

24
Opportunities in the Mexican Electricity Sector

Gross Domestic Product


Electric Industry GDP and other activities
Over the past 10 years, the electricity industry has grown at a compound
annual growth rate (CAGR) of 4.9%. By comparison, the national GDP has
grown at a rate of 2.4% over the same period, and the countrys industrial
activity has maintained a 1.6% growth rate.

Despite having a high correlation, the electricity industry in Mexico grows at a


higher pace than the national gross domestic product (GDP) and the industrial
activity, while presenting lower contractions during recessions.

Gross Domestic Product 2005-2015


Annual variation

15% 14.0% CAGR: 4.9%

9.6% CAGR: 2.4%


10%
7.1% 7.9% CAGR: 1.6%
5.1%
5.0% 5.1%
4.0%
5% 3.0% 2.1% 4.1%
4.0% 2.8%
3.1% 1.4%
2.9% 4.6% 2.0% 2.9%
4.4% 3.4% 0.4%
4.1% 2.5%
2.4% 0.5%
2.4% 1.9%
1.5%
0%
-0.5%
-0.5%
-4.7%

-5%

-6.2%

-10%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

National Industrial activity Electric industry

Source: INEGI, 2015.

This is mainly due the characteristics of energy consumption as a basic


need with no substitutes.

25
Foreign direct investment
Mexico had a record growth in Additionally, Mexicos Ministry of
clean energy investment of 214% in Energy expects to receive more than
2015. According to Bloomberg New USD150 billion over the next 15 years
Energy Finance, Mexico received a of investment in new generating
total of USD4.16 billion in Foreign capacity, both clean and conventional.
Direct Investment during that period,
compared to USD1.94 in 2014.

Foreign Direct Investment in Clean Energy


Billion USD
$16.00

$14.00

$12.00 $4.52

$10.00
$2.02
$8.00
$5.47
$6.00 $3.50
$4.97
$0.06
$0.01 $0.03
$4.00 $0.17 $0.06 $0.01 $0.04 $1.05
$0.05 $0.04 $1.76 $0.00 $0.00
$0.10 $0.00 $0.81 $0.30
$2.00 $0.28 $0.24 $0.99 $1.38 $1.37 $4.16
$0.44 $0.31
$0.15 $0.15 $0.85 $2.49 $1.58 $1.95 $1.94
$0.73 $0.45 $0.38
$0.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mexico Chile Morocco South Africa

Source: Bloomberg New Energy Finance.

26
Opportunities in the Mexican Electricity Sector

Other indicators
In addition to the electric industrys and the current exchange rate raise
performance, Mexicos overall issues for Mexico, there is an overall
macroeconomic indicators are positive positive outlook in terms of market
as well. While both government debt growth and business environment.

Mexico GDP per head


USD at PPP and percentage change

25,000 10%
7.9%
8%
20,000 5.9%
4.8%
6%
2.5% 4.5% 3.5% 3.9%
15,000 2.6% 3.0% 3.8%
4%
0.3%
-2.4% 2%
10,000

0%

19,640.0
18,800.0

21,1100
18,110.0
16,190.7

17,590.0
16,142.3

17,145.0
14,596.1

20,320
15,748.5
13,924.5

5,000
-2%

0 -4%
2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

GDP per head ($ at PPP)

GDP per capita growth rate at PPP (%)

Source: KPMG Analysis with information from the Economist Intelligence Unit (EIU).

Based on the GDP levels, a positive at a 3.11% CAGR during the 2015-
future macroeconomic situation is 2020 period, reaching an estimate
predicted for Mexico. After decreasing of USD21,110 per person for 2020.
by 4.5% in 2009, Mexicos GDP
recovered in 2010. According to the In the World Bank Groups
Economist Intelligence Unit (EIU), Doing Business 2015 report,
Mexico is expected to grow at a Mexico was ranked 39 out of
CAGR of 3.11% during 2016 2020 189 global economies. Due to a
to reach approximately USD1,527 new reform in Mexico, the country
bn within 5 years. reduced the number of procedures
to start a business by about 60%,
Purchasing power parity (USD) due to this the country saw an
projections for Mexicos GDP per capita increase of 6% in the number
imply an even more dynamic growth of total firms (negotiations).

27
Conclusions
The Energy Reform approved by the have been made to create a competitive determined to making strong efforts
Mexican government in December, market that can be internationally viewed towards sustainability and lowering
based on the Electric Industry as a success, considering the extremely greenhouse gases.
Law published in August 2014 and limited timeframe of implementation.
implemented late 2015, represents CFEs restructure plans will be a key
one of the major breakthroughs in the Although Mexico lagged far behind factor in determining a successful
Energy Sector not only for Mexico but other economies in liberalizing the implementation of the Reform, as the
for all energy stakeholders around the energy sector, it has now done so previously state-owned company will
world. Given its geographic location, with a considerable advantage where need to reduce its monopolistic power
Mexico holds an important commercial it can learn from previous regulatory to enable a competitive environment
and economic position in terms of mistakes in other countries and apply in the market. As it has been stated,
foreign trade and its proximity with the best practices to create a set the Energy Reform implementation
the United States making it an of market mechanisms adapted to brings plenty of opportunities for
attractive economy for doing business. the Mexican sector. private investors to participate in
the expansion and modernization
Previous governments had made efforts The timing of the new market of the Mexican Electricity Sector,
to liberalize the market but they had implementation could not have in every link of the industrial chain.
only done so on a limited scale. Now, been better, surrounded by a global In addition, the reform presents tangible
it seems clear that the required efforts environment, focused on and opportunities for consumers as well.

28
Opportunities in the Mexican Electricity Sector

Global Strategy
Group services in
the electricity sector
For any supplier seeking to enter or regulatory requirements, among
expand within the Mexican electric others, can materially impact
industry, it is imperative to carefully potential outcomes of an investment.
assess various key factors. There are Thus, a careful assessment of all
many benefits and advantages but these variables combined with a
also potential risks that merit full strong understanding of the local
understanding of the environment environment on the ground is the
and requirements before initiating a key for a successful entry.
relocation or expansion.
Mexicos Global Strategy Group (GSG)
An analysis of regional differences Team of experienced professionals can
(in costs, quality and availability) assist with various key topics relevant
of transport, infrastructure, skilled to strategic and operational planning.
work force, and government/ Our core service offering consists of:

Wholesale Electricity Market

Suppliers and Investors and


Generators
final users Private Equity

Commercialization Project / Commercial Market analysis


strategy diligence
Regulatory framework
Energy efficiency strategy Site location analysis

Niche market definition Target screening Product placement


strategy
Energy sourcing strategy

29
Market analysis Niche market definition
Used to determine the size of the market, understand the We help our clients develop a strategy to determine
regulatory environment, market shares of your competitors the most adequate niche market to supply electricity
and main drivers of growth, our assessment can also (large, medium or small consumers), through long-term,
provide insight into competitors strategies and growth mid-term auctions, as well as short-term market.
projections for each one of your products and services. We identify opportunities for suppliers to define a
We have supported many clients by preparing a Market market not yet supplied by other large suppliers or
Assessment analysis, especially at early stages of a design strategies to acquire already contracted customers.
strategic business decision, considering the particular
situation and prices at every node. Project due diligence
An analysis of projects in pre-construction, construction
Regulatory framework analysis or ready to operate, in order to determine if the project is
We advise our clients regarding the existing regulatory attractive to receive investment. We analyze every stage
risks and its translation into economic benefits for the of the project and conduct grounded recommendations
organization, interpretation of the normative framework, to private equities through a red/yellow flag analysis.
and the development of proposals with a strategic fit to
the companys growth policy. Site location
If a player is based outside Mexico and is looking to enter
Product placement strategy the market (or relocate existing facilities), there are many
We support electric utility generators in the design of factors to take in to account for the future success of the
strategies to place their products on the different markets business. KPMGs GSG Team can assist in first defining
available after the energy reform, such as long-term and criteria relevant to their strategy, and then identifying
mid-term auctions, as well as short-term markets, in order locations and options which best fit these criteria. Analysis
to determine the optimal product mix that maximizes our can include variables such as vicinity to current and future
clients profit while reducing risk. client base, land costs, construction costs, labor costs,
skilled labor availability, transportation costs and routes,
Energy efficiency strategy raw material availability, as well as benefits and incentives
We conduct analyses on load centers for large available at both state and federal levels. Furthermore,
energy consumers to detect energy efficiency we analyze variables relevant to the electric utility,
opportunities, reducing unnecessary consumption such as availability of the required inputs in the region
and analyzing the hourly price curve of the market (natural gas, solar radiation, wind, geothermal deposit, etc.)
in order to secure lower tariffs.
Target screening
Energy sourcing strategy In the case of a client looking to enter to or expand
We support our clients to decide the most efficient ways within Mexico via a merger or an acquisition (but also
to source their energy needs. Starting from the definition a partnership or joint venture), we can assist in locating a
of the amount allocated through every mechanism (long- suitable target. According to the needs of our client,
term auctions, mid-term auctions, short-term markets) to the we can help to establish strategic criteria; develop a list of
management and definition of the Request for Information desirable targets and negotiate partnerships or acquisitions
Process, to obtain optimal offers from energy merchants. on clients behalf (if required).

30
Opportunities in the Mexican Electricity Sector

About GSG
We partner with clients from the private, identify and address their most critical improve efficiency, and work along
public and not-for-profit sectors in all challenges and valuable opportunities side them through implementation.
regions to develop their strategy and which enable their organizations to Our Value Delivery begins with our
deliver results. Our clients operate in develop capabilities and transform. own strategy framework The 9 Levers
highly competitive environments and Our proprietary approach is of Value, summarized below. Together
in many cases strong disruptive forces, customized to each client to help the they form a holistic framework for
such as technology and regulation, mean CEO and management team design Strategy, structuring the business
that market places are evolving rapidly and execute to create an enduring model and how we approach our scope,
and financial, business and operating competitive advantage. We generate how we identify interdependencies,
models need to be redesigned. We work ideas for and with clients to drive and how we blueprint for high-level
shoulder-to-shoulder with our clients to growth, organically and inorganically, design of your operating model.

9 Levers of Value 9 core principles


Financial ambition 1 Focused Aligned Proactive
Strategic &
financial
Markets 2
ambition
Propositions & brands 3
Customers & channels 4 Driving strategy Aligning the CEO, Determining an
development from leadership & organizations
Business
model strategy
Core business processes 5 + financial outcomes management team
to the strategy
capabilities and
readiness to execute
Technology & operations infrastructure 6 Prioritizing by Engaging financial, Managing
materiality and business & operating interdependencies
Governance, structure & risk 7 criticality model constituencies

Operating People & culture 8 Thinking inductively Aligning the Identifying and
model financial, business & managing intended
strategy Measures & incentives 9 operating models & unintended
consequences
Management
information

Outcomes Focuses Aligns Enables Creates


on value stakenholders implementation momentum

We invite you to learn more about the Global Strategy Group and work with us to make KPMG the clear choice.

About ENR
How can we help
technological) are ready to help you meet
your business goals by providing added
value to all activities involving the energy
industry. To seize the opportunities of this
context, we offer the following services:
Structure and alignment
of business processes
Risk management
Regulatory compliance

Based on our knowledge of the best Planning and strategic alliances


practices of international business which Technologies and control
gives us local and global experience our mechanisms, considering
multidisciplinary teams (fiscal, legal and geographical factors

31
kpmg.com.mx
01 800 292 KPMG (5764)
asesoria@kpmg.com.mx

Contacts Contributors
Oscar Silva Diego Bojorquez
Partner, Global Strategy Group Global Strategy Group
E: osilva@kpmg.com.mx
Alfonso Piza
Lina Angelov Global Strategy Group
Senior Manager, Global Strategy Group
E: linaangelov@kpmg.com.mx

Ruben Cruz
Lead partner, Energy & Natural Resources
E: rubencruz@kpmg.com.mx

Arturo Saavedra
Director, Energy & Natural Resources
E: arturosaavedra@kpmg.com.mx

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely
information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information
without appropriate professional advice after a thorough examination of the particular situation.

2016 KPMG Cardenas Dosal, S.C., the Mexican member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.
Manuel Avila Camacho 176 P1, Reforma Social, Miguel Hidalgo, C.P. 11650, Mexico, D.F. Printed in Mexico. All rights reserved.