af RETURN TO | RESTRICTED _ IREPORTS DESKt IP- ClPV IAILI4 7 j tWITH-IN Il bvi j "V vvn Ir A [ ONE WEEKI Th,s4 repvr, was prepare' 'for use Iwithi If Bank and' Its am'Tliatied organizzationns They do not accept responsibility for its accuracy or completeness. The report may notr De puuish'ed' nOr.may it be quotedo as representing thneir vi-ews. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AN APPRAISAL OF THE DEVELOPMENT PROCGRAM A 1 ,% VOLUME IV ANNEX III - ELET.FTRTIG POWER July 13, 1964 Department of Operations Western Hemisnhere CURRENCY EQUIVALENTS U.S. $1 12.49 pesos 1 peso (Tex$) = TT S. $. 08 1 million pesos =- U. S. $80, 000 AthfLEV TTT TUT T,(r eT i Thr'rn ft,XU XL RħU r UL'V2A TABLE OF CONTENTS Description Power Program, 1963-1965 3 Generating Plants 3 Frequency Unification 4 The IlIalpaso Project 5 Distribution System Expansion 6 Power Program Review as of January 19(4 8 Return on Investment 10 Financial Aspects 11 Future Development of Power Sector 12 Attachment 1 - Historical Development of Power Sector Attachment 2 - Bases and Assumptions for Rate of Return Calculations in Table 9 LIST OF TABLES 1_ , eneraa` - . .. 5 _t ` ` ty - . r1t;x1 co -r wr X U U1made from the national budget and givfen to CVl". 6. The govertunent acquired the Hiueva Cia. Electrica C'napala in 19L!0 and in 1960 purchased the large private power coripanies, so that it now owns the entire power facilities in the country except for soine small private compacaies and captive plants in private industry. 7. The tabulation below shows the major entities in the power sector at the end of 1962 and the generating capacity operated by each. ANTIhM 11I ELECTRIC POWER -2- a. Controlled by Government: Gen. Capacity 1. CFE 1,66o irw ii. CFE Subsidiaries and Affiliates Industrial Electrica Mexicana S.A. (IEMSA) 341 MW Nueva Cia. Electrica Chapala S.A. 127 14W Electricidad y Gas de Monterrey 88 mw Eight Small Subsidiaries 17 iYW Total 573 M4W iii. Mexlight 667 NW Total Controlled by Government 2,900 g W b. Small Private Companies Total 52 MW c. Captive Plants in Private Industry and the Government-owned Petroleum Industry (PENEX) 700 14W Grand Total 3;652 nWI 8. The nower sector. at present; may be viewed as cormrising eleven major systems covering various parts of the country, as shown on Map I. Outside these svytems servie to o i olated tomns nnd zones is provided by small private companies. 9. In the major systems power is generated in the plants of one or more of the power entities, whose transmission lines interconnect the various facilities within the system. 10. At most locations CFE provides power in bulk to the local company to make up its energr requirements beyond that generated in its own plants. At some locations CFE also handles retail sales, which at the end of 1962 amonted to aout 31 rcent r -;+c +c%+n1 tAl .r-++ . -1lac, / a w V V i VV A _,- F-V. - --V V VV C-.- -_V VVLV7-a-a and produced about 46.5 percent of its gross revenues for the year. Takble 2ilveO s a sm,fl,n? of4' the f c fPor retail. -nA b-0n power sales from 1963 to 1970 for CFE. This projection made in 1961 is equivalent too an aver-ageJ rate olt^ iJncrease.. in CEI's 4t sae of about d-4J an.&d was- based upon a sector-wide rate of growth of 85. Actual growth in 1962 was slowr thn forecast- 1but reu,.to ofU the 8 4atlor,w-e i^atei resoabletii~.'v~ v~inħ~ ~ t~LL U UUh 1ight of the . c JL1 eom prosp e/c .s1CXU UW.LUt £d -L reasonable in the light of the country's economic prospects. "LA%X III Er LEv nI HVNMI" ELJ. tl.LlTRICL POWER ruPOlvR PROGRAu .9j/3-1965 11. Since 1961 CFE has been the only entity to construct new generating facilities and it is the Government's intention to continue this policy, so that, in the future all the retail companies in the major systems v1i1 purchase their requirements for power, above that generated in their own piants, in bulk from GFE. The trend will therefore be for the other companies to gradually generate less power from their own plants as these become obsolete or less efficient in comparison with new CFE plants. 12. During the year 1962, by agreement with the other entities, CFE developed a program to control the planning for expansion and the op- eration of all major power plants in the eleven major systems except the captive plants in industry. This important step in the coordination of the power sector is essential for the orderly planning of future system additions, particularly as more areas become interconnected and oppor- tunities present themselves for the more efficient and effective use of all generating units. Proper coordination and control of operations of the various units will allow each to be assigned its optimum position in the generating schedule for the particular system and help to lower production costs. Generating Plants 13. The generating plant capacity now in service and that under con- struction generally makes power available to meet present and estimated future demand for the next four or five years more than adequately. In several of the major systems there is a substantial surplus of capacity which could have been added more slowly. This surplus capacity aill be absorbed as load increases but, in the meantime, it represents an un- productive investment which could have been avoided if the coordinated planning now envisaged could have been instituted earlier0 14. In 1962 the World Bank made a loan of US$130 million to help CFE complete the construction program it started earlier. Table 3 gives a list of plants, associated substations and transmission lines whieh were under construction in 1963 for the various systems. Table 4 gives details of the available canacitv and estimated demand by systvems from 1963-70, as projected in late 1963. The program has since been changed to provide for freauencv unification and larger generating units at Malpaso. 15. It will be seen from these tables that in 1962 CFE had about l.h million kilowatts of generating plant under construction at 19 diff- erent locations throughout the country. All these new facilities are scheduled to come into service before 1966 ard construction iS well ad- vanced beyond the stage where it could be stopped or delayed to econom- ical advantage. Hence the decisionr was +aken to complete these works even though, in several cases, they will not be immediately necessary to suppr1lyT the demand A for. 'VTe r A1TrJII TTT 7T1Th'7'P Tr. .LU. 1i.L IAiUU 11 UL1,i IIdLO d. LUoIIIPUUULI U sUaL,.ħJ 1).L -LU UVJLij, ħ U ILCħ VUL J LVJ.~LJV~ called upon the assistance of consultants and specialists from all over Ldħ( world Lfor ad- CGjvice and i1UdpeULUtU opinLLoI. Te1se UA:(L-U .V 1,CeVt4. ve UoLe been requested to review design work, supervise construction, give counse'l Ou specia1 mIabters of UL-CUnsLEU4ucLUE UUħgItl adLIU geoloicai stUUdsJ review progress in construction and operations and planning for future exoansion, and make special studies as required. 17. The technical aspects of the various piants now under construc- tion were carefully studied by CFE with the aid of these consultants, and in all cases the plants themselves are weiv designed and are being con- structed to accepted modern standards at reasonable cost. Frequency Unification 18. IThile the power program is meeting energy demands in all parts of the country it is important to note that 72 percent of all the energy used is consumed in the central part of the country with Mexico City as its hub. 19. This central area is served by four of the major systemis: (a) H4ichoacan-Chapala-Guanajuato System (b) Central System (c) Puebla-Veracruz System and (d) Minatitlan System, which are in the process of continuous extension as a natural consequence of the load growth. 20. The energy demands in this area and particularly in Mexico City have reached such proportions that large power sources of over half a million kilowatts capacity each are being built or planned to supply it. These sources can only be located where natural conditions are suitable or adequate for the construction of hydro or thermal plants of this size. Transmission lines have then to be built to connect these plants to the load centers. Ilence, the trend is nrogressivelv towards the inter- connection of all systems and the final integration of the whole power complex. 21. Integration is the next logical step of development and CFE has already made some plans towards it. However, a very serious problem is encountered because the system frequencv of the Mexlight (Central) Sys- tem is 50 cycles, whereas the other power systmTns in the country operate at 60 cycles. 22. The significnne of the diffefrenee of frnnencyv in the I.Mexlig ht system and the relative importance of this system in relation to the total power p r itz The evxlr>light system in 1963 sold more than 4,000 million kwh, equal to about 40 percent of the totafll energr snles for the cut1ry+. The comrpany generated about 70 percent of its demand in its own plants and purchased the balance in bulk from CF.E. Ho-wever, since all future increase in generating cap- acity is to be provided by CFE and as the estimated annual growth in A 1\1Tt1' TTT VT,T7v'1MT,' demand of the system is abo-ut 6-8 percent, it is obvious that continued operation of Mfexlight and CFE at different frequencies would make it increasingly difficult to create a fully integrated national power sys- tem so that all generating facilitics would be utilized in the most efficient manner. 23. In addition to the operating complications caused by the fre- quency difference, there are important economic disadvantages. The large amount of power from the InfiernilHo plant (600 NW) which generates at a frequency of 50 cycles, can only be used in the Central System where it is not all needed immediately and where, even Twith the shut-down of over 120 iNW of existing thermal capacity, there will exist very sub- stantial capacity surpluses into 1968. In an integrated system with unified frequency, this power might also be used in the present Puebla- Veracruz or Michoacan-Guanajuato Systems. 24. In 1961 and 1962 Electricite de France and SOFRELEC had made a study for Nacional Financiera S.A. of long-term planning for the Mexican electricity industry. The study recomiended the intcrconnection of the systems in the central part of Mexico and a standardization of frequen- cies. In 1963 CFE engaged the Bechtel International Corporation to study the unification of frequencies for Mexico. The Bechtel Report of Septem- ber 1963 on comparative costs for the unification clearly shows that the most economic solution would be to change the 50 cycle Central System to 60 cycle operation. The HIalpaso Project 25. Early in 1963 the Bank was requested by CFE to permit inclusion of the llalpaso Hydroelectric Station in the expansion program. The initial proposal by CFE was to substitute Malpaso as a more economical alte.rnative. to other previously nlanned plant adr-fitJons in the Piebla - Veracruz Panatitlan System. 26. In 1961 the Secretaria de Recursos Hidraulicos had started con- struction of the Malpaso dam with government funds as part of a flood control and irrigation scheme on the Grijalva River to serve the Chon- talpa region, located on the gilf coast between T-vinatitlan and Herida= The work on the dam is now well advanced and completion is expected in 1965. The creation of this dam provides a source of potential hydro- electric power. 27. CFE assumed that the cost of the dam would be met by the govern- ment and that the powe -- ---Ject wudonly be charged writh +he actulln cost of the plant and immediately associated civil works. On this basis, the studies of thLe various alerative plant desi..s sWhWoeU Vthe poss- blity of constructing a plant at the dam site with an ultimate maximum c(ħpcwLiJy Lof. aboutU I700 ħi.W. Ai\T-E\XY TTT 7T.VrPTIC POW1ER 28. In August 1963 a BdenLk' II .,LOJss 1madeU ain aLppJrisa.L J. LoIf _power aspects of the Malpaso project based on an installation of 450 NW. The unit cost of t he power facilities, excluding the dml but includirg transmission lines to serve the Puebla-Veracruz system, was estimated to be equivalent to US$160 per kw. Tne mission agreed with C'E that Malpaso represented the most economical installation to serve the Puebla-Veracruz System even though the plant would be capable of gener- ating more energy than presently required in this system. 29. With frequency conversion and interconnection of the Puebla- Veracruz, Central, and Michoacan-Guanajuato Systems, Malpaso could be built at the start to an optimum capacity of about 700 11RW and its full output used to replace existing thermal generation at substantial savings in fuel costs. Distribution System Expansion 30. From its start CFE has been mainly concerned with providing power plant capacity; at first to small areas later to augment the capacity of the larger systems,and finally moving into its present posit:ion where it is the only builder of new plants and has started controlling the operations of all plants serving the public in the major systems. 31. Until 1960, when the government purchased the major private com- panies and obtained control of almost the entire power sector, retail sales and distribution of electric energv were in the hands of private companies; Attachment 1 gives further detail about these companies. Two of these. Mexlight and Impulsora. delivered over 85 Dercent of all the energy sold to retail consumers in the country. Thus almost all dis-- tribution systems were in private hands and oach entity nlanned its own system expansion and improvement in accordance with its needs and the financial rPqsorrt-es avail ble= 32. Under the conditions which now prevail the retailing companies acquired by the government have been relieved of the problem of providing new generating fa.llities hut fane a growing nroblem of transmission and distribution system expansion and improvement to deliver the ever larger quantities of enerav demanded by the consnnmers. 33. During the past several veprq hehi.se of inrdequmte elec1-tric rate the distributing companies were not always able to maintain their systems in satisfactory condition nor were they able to carry out all the expan- sion needed. This deficiency is now showing itself in higher than normal system lo-ses at vrarious locat-ons 341. T-In 92 O hotl befor 4h1 last- A,l Bznk loa -As mad ,th JL046 1 .L/LI .., d5 .L. L'V 4 Li VIAW .ILO. JV VVW..LLA 1JOħLL'" .L MIA~L Cvo.di retail electric rates were raised throughout the country and the bulk power raes at ufWlich uCr soiU L o utie retaiħlħlg UBIIP;dLLeie Wab EVtL V ħU. AAIVr.A 111LJ. XL uifLJa Ij. POWER However, while this rate increase lielped tne distributing companies it does not appear to have solved their problems comipletely for a number of reasons which are discussed later in this report. 35. The problem is particularly acute for i'iexlight, the largest of the distributing companies, which now estimates it will have to invest a total of about Ps. 780 million during the years 1964 and 1965 to ex- pand and improve its system to meet load growth and connect new cus- tomers. 36. The program proposed by this company consists of (a) the com- pletion of a 220 kv transmission ring around Mexico City with associated step-doawn substations to feed the existing 85 kv system (b) additions and improvements to the present 85 kv circuits and substantions (c) additions and capacity increases to existing distribution substations and networks (d) miscellaneous buildings and other requirements to serve new customers. 37. This program wJould increase the capacity of the 220 kv trans- mission lines and substations by about 900 INA and provide facilities to carry this power through the 85 kv system and distrlbution net,uorks to the ultimate customer. Since ijlexlight expects to experience an increase in peak demand from the present 1,050 KVA to 1,700 KVA in 1970 and plans to receive this increased power from the CFE Infiernillo plant (600 i'99) and other future CFE plants, the suggested expansion of the transmission and distribution svsto-m annears reasonable. 3R5 At. the prersen+t, esi+.mntep 1n eF:q:n n t.hP `4pHlight. sCyte.Pm are 1I percent which is some 3 to 4 percent higher than might be expected. In terms of revenues +his excess in losses rpnreen+.ts ahb . Ps. 4 m)n lin annually, whli ch might be saved by investing in system improvements. Thus, while it is not usual to at tribute reduction of losses o any specific item of system betterment, the justification for this invest- ment. is givern adnde supnnort+. whe+cn csrys.rtem lossQc ayre hig her +.han nrrnmllyr might be expected. 39. There is no doubt that the distribution expansion and better- --+a.- -,n,n 4- r.r-rArcA Urr.. A..-e 4- 4-,-~ -n.n-_ ~n., - ;- 4 ,- mens- prob J t1 isu -eedVed. ver, dU to the siharp. ir.LlcLre in vth amount of the proposed annual investment over that actually invested during the past two years and in view of the com.plex natre oP the pro- posed program it is felt that a more detailed examination and analysis "Jud be required before full inosme. coul be -giver..--,I 1 -, S4... it"J.c d.j9jJ%L' IA)u Utz; UVL clU l.)J.LU J OU_ L dLLCt.LUIIIJ I ~ħ~ 0. Thrsapast ecnsidral Uusifiatin for a detail-ed review of Alaxlight's program by an independent consultant who should take into consideration, in partlcular, the siZe of the programO. It is felt, after a limited review of the program, that the amount of the annual investment might be reduced by as mucn as 25 percent by being more selective in assigning priorities to the items of construction. Thus the work could be carried out during a four or five year period instead of the proposed three years. A ,1,TL-~V TTT r~T V O PnPTO POVER 41. In the case ol- EMVMSkSA the problem Ls much srmaller ar-d the esti- mate is for a total investment of Ps- 535 million'during the years 1964 and 1965. 42. The IEMSA group of companies is divided into six divisions serving small towns and rural areas throughout the country. Therefore, its distribution system improvements program consists of many minor betterments and small transmission line and substation improvements. There is no available data upon wyhich to assess system losses but it is known that these are high at a number of locations. 43. It would appear that IEMSAts suggesttd program is not unreason- able in view of the anticipated load increase during the years under consideration but in this case too, it is felt that the annual invest- ment might be reduced by a more critical review of the proposed program. 44. In any expanding power system there is always some flexibility in the rate at which new investments must be made to meet the growth in demand and at the same time maintain an acceptable standard of service. After the basic elements which determine the need for a specific item of system improvement or expansion have been examined and the proposed inve,;t- ment has been accepted as justifiable. them comes the decision on the optimum moment for starting construction. 45. The decision on timing is largely a matter of judgment by manage- ment after carefully weighing the local conditions prevailing at the time and the company's ability to make the investment. L6. In view of the large investment program required by the power sector and the peak in this investment during the next. three or four years, the burden of financing may be eased by delaying some investments for a yrear or two Sim.-y ny og prio t-r_ o+ to fhe -y.ariou nii-' tems of con- struction on the basis of "necessity" rather than "desirability". POWpER PROGRAM RE,V EJ AS OF jANUARY 19,6L )7. The power program proposed in Januay Jr I6CA by the several entities in the sector would require a considerable investment during 1963-65 amounting to about Ps. 6, 700 million. Table 5 siiumTI rizes these proposed investments. 48. The major portion of this investment, about Ps. 4,900 million, is to be rAde by CFE in the constructinor of new plants and the frequency unification, while the other power entities consisting of Mexlight, LZMSA, Chapala ansd the small companies, will .make investments omnount- ing to a total of about Ps. 1,8C0 million in transmission, distribution, substattion and other facilities to serve the customers in their areas. ANNEX III ELECTRIC I 'JlaER -9- 49. As a result of its own studies and the reports of outside con- sultants, CFE has Mod-iied its program to include the -alpaso Plant with h - 180 MW units, the change of frequency of the Central system from 50 cycles to 60 cycles, and tne interconnection of tne three large systems across the central part of Mexico. Preliminary plans have been prepared for the gradual changeover of the 50 cycle generating stations as the corresponding changes are made in the consumers, appliances and equipment. The surplus capacity at Infiernillo will permit flexible operation at both frequencies while the changeover is accomplished. The Central system will be interconnected with the Puebla-Veracruz System by January 1966 and with the Michoacan System by January 1967. Malpaso's first unit is scheduled to come into operation in TJune 1967 and by the end of 1968 the frequency unification will be substantially completed. At that time the coincident maximum demand is estimated to be about 2,400 KT and the firm capacity of the system,allowing 15 percent for outages,wil1 be approximately 3,000 lW. 500 Although the total amount of generating capacity by 1968 for the combined three systems will be considerably greater than required, over 700 MI of this capacity is thermal which will only operate on stand-by or peaking status. The available hydro energy, based on an average hydro- logical year, is about 11,500 GWH which would almost meet the total generation requirements of the system thereby effecting large fuel savings. On balance, and especially considering the advantages of an early fre- quency unification, the overall program appears reasonable, although a delay in execution of parts of the progran is desirable. 51. The inclusion of Malpaso in the program together with the fre- quency unification permits CFE to delete the proposed Salamanca thermal station and would delay for some years the proposed La Villita hydro de- velonment dowmstream of Tnfiernillo. The Comision has also decided to delay the Ciudad Juarez plant until about 1971 by continuing to purchase np.wer frnm the Ei R.1 aS Paso rir (mnyrnmnr_ 52 T abl9 7 nresents an analysis of the sources and application of funds for the power sector as a whole assuming that the program as pro- posed by the Mexican power entities is adropted. It will be seen that there would be a large financing gap of about Ps. 1,460 million for the next +wo years. 53. The missionn believes that one basic st-p to reduce the -a shollt, be to rephase the investment program. Based upon previous years'estimates as compared to actual construction progress, it is reasonable to assume that CFE's program would slip some 10 percent. In view of the large b'-ck, ofP capacity whichA will bUe availjable fPor thle cen4ra par of 4the country after Malpaso is built and after the frequency unification is rde , no Just-ifiaion for the Lae V--- deelpren ca be estab-l.AJ Lħished; hence it should be postponed. With regard to the frequency changeover, i is U LS U 1,1UJ. Wilether the proposedu exp-endit iuuure of Ps. 1U09 mi'"iLon coulUd all be made this year so the mission would reduce this amount to Ps. 60 million. Finally, the miissiOn recommUTiends that the estimated distributioCn ANN>EX III ELECTRIC r' .,r,rt - 10 - expenditures of both Yexlight and IEMSA be reduced by some 25 percent for 196U and 99~). Table 6 shows the effect that these suggested changes would have on the investment program for the years 1964 and 1965., amounting to a reauction oi about Ps. ,7u million wnicn is equivalent to 13 percent of the total investment proposed for the period. Even if the reduced program shown in Table 6 is adopted, the financing gap would still be about Ps. 900 million. RETUTi ON INVESTPENT 54. The financial condition of the major power entities is illustrated by the information given in Table 9, which gives "rate of return" cal- culations for CFE, Mexlight and IEMSA separately and cumulatively. The analysis shows that the return on the power sector investment would de- cline from 4.9 percent in 1963 to 4.6 percent in 1965 with an average of )47 percent for the three-year period 1963-65. If the 10 percent power consumption tax is considered as part of the earnings of the sec- tor, the three-year average return would be 6.6 percent. These returns are not considered satisfactory and are far below the 8 to 9 percent level which might be considered the minimum acceptable estimate of the cost of capital in Mexico. 55. This analysis is based on the figures obtained from the various entities at the beginning of 196L in Mexico and on certain specific as- sumptions which are explained in Attachment 2. The return is calculated as net income from operations exmressed as a nernentage of nver2ge net fixed assets in operation. 56. It is to be noted that these "rates of return" do not correspond directly to the "return"' as dfined in -hp Mexican rate legislation for regulatory purposes. Also, the different entities differ in their drec -i2tinn Ano-nina and te ir.vesA-treQMnt is U ve1n C oigJ-.a cost in Mexican pesos, in accordance with Mexican law which does not provide for any revalIntion of fixed assets. Thus while these "ra+e of return" figures are illustrative of the financial condition of the mninr sntities in the power sector anrd of the sector as a whole they May be subject to some adjustment which, most probably, would make the real rates of r1turn lower than those sho-Wn in Table 9. %7. Part of the problem of the low return for the sector may be attributed to over-investment by CFE in the past in generating plants. Tf this investment had been made more slowly, particularly in the major systems where considerable excess capacity will exist for the next few years, the present burden of flxed charges for he sector would be much less. ANK,NEX III ELECTRIC flnfT 1tTr - 11 - 58. On the other hand, Mexlight, IEMSA and the other retailing com- panies must now invest in distributing facilities to meet the growing loads and demands by their customersQ These investments have, in some instances, been neglected in the past. Howiever, these companies are not earning the necessary funds to contribute sufficiently towards their own investment program nor do they have a rate of return which makes them attractive to outside lenders. There is obviously a need for assistance in the form of increased revenues or, as a last resort, direct government subsidies. FINANCIAL ASPECTS 59% If the contributions to the power sector by the Government are not to increase, the only method of bridging the remaining financing gap is: (1) by raising the earnings of the power sector through increased retail rates or higher electricity consumption taxes; or (2) by additional borrowings. The mission has assumed that in order to increase the cash available for the sector, a doubling of the 10 percent power tax could be in effect by the fourth quarter of 1964. If the proposed 20 percent tax is considered as income, the overall return on investment of the sec- tor for 1965 would be 8.0 percent. 60. A financing plan, shown in Table 8, has been prepared on this basis for the remaining two years of the program assuming that the alter- native construction program of Table 6 would be carried out. In addition to the increase in the power tax, a new long-term loan has been assumed which wouldl cover the foreign exchange component of the program which is not yet financed. It has also been assumed that the short-term debt of both CFE and Mexlight would be refinanced by three to five year loans. NAFIN has already initiated the refinaneing operation for (GFEP For 196)i the plan would still be insufficient by some Ps. 176 million. In 1965, it was asslLmed that rFE would pny its nm rn. debt service on +he sp-czinlipr.0 credits signed by NAFIN and that Ps. 175 million of new supplier credits would be obtained for the generating equinment at Tiliana. Loso Mochis and La Laguna. The deficit for 1965 would amount to about Ps.145 million. 61. From the above financing plan it is clear that even the combined effect of a siz.able tax increase (or an equivalent rate increase) together with a loan covering only the foreign exchange component would not be ufiin to meet thne rDequirements of the sector. Eit+vhIr inc- reased government contributions or long-term loans covering some local explt '. + 11-- %o Q t4. A. %+ J 1 1 . hA C J. J_t peas o -yndw s _ z_ksw-c A1NIEX III ELECTRIC - 12 - FUTURE DEVELOPDEENT OF POJ`ER SECTOR 62. It is obvious from the discussion about the Power and Investment Programs for the power sector that these matters cannot be dealt with by examining them exclusively from the point of view of any one of the entities in the sector but the problems must be viewed and solved on a sector wide basis. 63. As time goes on the major systems of the power sector will become more interconnected, as is rapidly taking place in the central part of the country. Thus, requirements for generating capacity, substations and transmission lines are no longer the sole concern of the company or entity supplying the load but affects CFE as the entity responsible for supplying power in bulk. It also concerns the neighboring corianies wzhich, by coordinating their requirements with one another will most probably effect considerable savings in investment by avoiding future duplication of facilities. 64. The orderly planning of a system's expansion presents readily seen advantages through standardization of designs to save construction costs and to take advantage of quantitv nurchasine of equipment. It has already been mentioned that increased power demands are causing CFE to build larger power pl2nts= Thwq_ the timing and 1ohrt_on of new nlants and the operating schedules for all plants, become major factors affect- ing the cost of the energy generated. 65. Thlere are m.any m.atters, such as frequency un-ification, revislons of bulk and retail rates, and financial planning wihich concern the sector asa hol and i n which the; int_eests of more than one. of the power entities is involved. In some cases these interests may conflict one tA+11 +the o-t hence . ed a c tin n ri,. , ĥCo red. 66. AM -rsn h power sector - can- be gopdunder rTE ard + s subsidiaries and affiliates on the one hand, and Mexlight on the other. However, a +I ,h eAch has ;+r s manag erment and operate s m m entity, the financial position of CFE and Mexlight are inter-related th.rouglh b'ouk sal-es and {hVe bullkl -LMV-erL Mate. '",-+I, ------ Qhe fiania soundness of the power sector depends upon the soundness of the indi- V.LUCLL. e e1 s -U.rithi WLUL e sectoriU 0U%ereforj eL, O cnsUtant reAV. tV U.L u1th financial needs of the various entities is essential and a procedure shLuUlU Ub e ,j isu LUUU WIUL-weeby adjust[ ofLeEiQ U i. ULU4L ULAU and rtul r.Uates cadbLIe made quickly when required and carried out in an orderly manner. 67, Prior to the nationalization of the powver sector, the govern- menrt's major concern was to maintain Crr in a position to invest in needed plant construction. The distribution of energy was mostly in the hands of the private companies winich had to manage tneir own finances. This situation has now changed so that a new approach and policy by government towards the several entities forming the power sector is urgently needed. As an illustration of the need for uniform treatment ANihEX III EILECIC - 13 - of the entities, MTexlight still has to pay income tax on whatever profits it makes and both MNexlight and TiSSA have to pay customs duties on imports whereas CFE is exempt from both. 68. These problems and requirements show the need for the establish- ment of some authority or procedure whereby the activities of the several entities of the power sector can be coordina-ted and planned to the mutual benefit and to the best advantage of the sector and its power customers. 69. As part of the long-term planning study in 1961, Electricite de France and SOFRELEC considered the organization and operation of the power sector. This study recormended that a single organization be set up to absorb the existing power entities. A draft statute has recently been prepared for submission to the Legislature which would provide for the creation of a new body to be called "Electricidad de MvIexico" with responsibiLity for the develorment of the nower nrogram and the coordina- tion of operations. ATTAC2Th'E!,h1T 1 AISTTCKI PAL D-VELOPIY-ENT OP POiM'R SECTOR 1. R1.ctric. nemxPr was fi rst. rdevop'edim'r in fexric on hb-y privatp corm- panies, many of which began their operations to provide powrer for their owsn u-se i-n rinesqo factr,+iesz andi lnater exu+endedA coniceo the surrund ing territory. The major entities are comr.ented upon below. a. In 1902 The P'exican Light and Poi.,er Company (h§exlight), a privale C-nrdian registe,redA conpany, began pertions in lexico City an,d its surroundings by acquiring a number of small comp-^nies and _ ra U-1 , ' A - -I-A 4I I- IA- P A- 4 4 __4 -LV e e'lect _4 mscltsclJ trVcv0,r. uluotz UV -Vl Ultu w1sJ;Gv 1 JJvas vou u1 UI J utility in the country with 585 ;;i of generating plnt capacity anrd Pinnupl sales of 3,] 8 m4.l'ion Xw. -in 1962. ]-.ap TI shows the I'iexligeit syrten -s it wTas in 1962. In 1960 the government bought 91 percent of the conmon s"Are IAn 1 '7 pe c nt 0 4 __ A A., .L _111- A -A_ vfliUv diAA { 9o V[i U1 WIl- V 81 U ll V;OfiU C W Ui- Ui.L %-U,upI.J5 tnus becoming tne majority shareholder. Tne company rerained -undr t orig l Uanadia ..i. ..ħ. -LU1 ithau offices in. T0oronto, CJanada. t tne sharenolders' meeting in Toronto, three weeks kLter, the forner officers and directors of tile company res igned and were replaced by- iexican officers and directors, representing tne various branches of the federal government, Nacional Finan- ciera G. '. and Comision Federal de Electricidad (CGF). Iexlighit continues to exi*,t and operate as a separate com- pany although it is now under government owmersnip and control. It coopcerates 1with 'SE on the operation of its generating plants arid purchases about 30 percent of its power requirements from CFE in bulk. These purchases of bulk power will increase each ye^,r as the load served by the company grows and since it will not be permitted to add to its own plant capacity in future. 1rT.ediatelyr after the purchase of 1i-exlight by the govern- rment an amendment wuas made to the 27th Trticle of the National Constitution, reading as follows: "The Generation, trrnsnissicn, transforr-tion distribution and supply cf electric energy for the purpose of rendering a public service corresponds exclusively to the 14Thtion. No concessions will be granted in t'lis area to private pprties and the 'lotion will develop the .ssets nnd national resources which are Pcquired for said purposes." (This quotation has been taken from the hexlight P:nnual Report of 1960.) This constitutional amendment was made to assure the total n?tionelization of the power sector and to prevent the appearance of new private companies in future. I;sxlight in comTon with all the other companies receives no contributions from governnent to,wards it construction program nor does it obtain any benefit from tie electricity tax wnich it collects from its customers and passes on directly to -FE. It ATTACEHENT 1 L ar'u L. also has to pay CFE for all bulk power puirchases. In other words, it rustake responsliU"livy fJI- rasigt.e fUrLUUs for _lts. ownI _ir.vet.,enJJts; for system expansion, which it has obtained from internal cash gen- eration anai exTlernal borrowJings. Tne Torld Bank made loans to Nexlight in 1952 for uS$26 million and in 1958 for US$11 million to enable it to increase its plant capa- city and make otner system improvements and extensions. In recent years Mexlight was forced to finance its expansion increasingly with supplier credits and short-term bank loans which in turn added considerably to its financial plight. There is a change taking place in the character of Mexlight and the other previously private companies which affect their operations. These companies started as self sufficient power entities with their owni generating, transmission and distribution facilities and sold the power they generated to their own customers. With the advent of CFE as the major generator of power selling to the other companies in bulk, these entities have become retailers of power. The character of their operat- ing costs will change as generating costs decrease and purchased power and labor costs assume larger proportions. The following statistics taken from the annual reports of Ivlexlight serve to illustrate this point: Percentage of gross revenues paid out for: .959 1962 Salaries and social bcnefits 3percent T40percent Fuel 3 " 9 II Furchased bulk power 14 " 21 " Other exoenses 8 " 6 " Depreciation and amortization 9 " 5 " Taxes IL " h " Interest 8 " 7 " D;vidends I tt 1 II Reinvested earnings 3 T 7 II 100 "I 100 The ae.tual amounts paid for the variouis items shown ahove will change as adjustments and corrections are made by the retailing compan- *es to adapt. to thpir new onerating c-onditions. However, these factors should be considered when the power rates are reviewed so that an equit- ablel ristz+ribut+ion of cotsrq+ is obtnnina befitween buiilk supplievczrs f onperc-r and the retailers. b. In 1928 La Impulsora de Empresas Electrica (Impulsora) a subsidiary of n,er,can Foreign, P^jwer Corpa.r., a 1r--vte tTvvi+ed S4+a+es ,,sr its activities by acquiring small isolated companies throughout the fll,n+.,r Tt , e -t r rP +o e o * *P "" h *.yn, hw .y1 *r r ',I . Y 0 --Q E '~-AJ ..'4 - 'JAIM L4 ~VLi4A.L k i~ ~ 0_6LIWLJ' .Lil UL, connected by transmission lines, developed to form the second largest private u+ility group. It served 1 UI of1S J_. f_ULw L U- , L s IystIe sLIUW1 on Map I: ATTACHAE&NT 1 Page 3 (a) Torreon-Chihuaiua (b) Guanajuato (c) Puebla-Veracruz (d) Merida anu e)I the town of Tarnpico. In 1959 nnpulsura hau an ħiLnstallUe generating plant capacity of 340 Mw and annual sales of 1.605 million kwh. In 1960 Nacional Financiera S.A., on behalf of the government purchased the assets of impulsora from American and Foreign Power Company and later transferred them to a CFE subsidiary, Industrial Electrica Mexicana S.A. (IEMSA). IEM.SA has a considerably smaller requirement than Mexlight for investment in system improvements and expansion but faces the same operating and financial problems. The only difference is that IEMSA is a subsidiary of CFE and may be able to obtain limited financial assist- ance from the parent entity. cQ Other Companies The remainder of the country is served by a number of smaller private isolated companies supplying power to the town or area in which they are located. The two larger of these are: (a) Nueva Cia Electrica Chapala S.A. which the government acquired in 1940. (b) Cia de Tranvias, Luz y Fuerza de IMonterrev which was owned by International Power Company of Canada Ltd., Nontreal, Canada, and which was purchased by the government in 1962. Most of the smaller comnanies have now benome subsidiaries of CFE or are slowly being acquired by it. ATTACHMENT 2 BASES ANTD ASSUIPTIONS FOR RATE OU' RETiIlFLI CALCULATIONS IN nAD. . _ The rate of return calculations were only made for the three large government-owned companies CFE, Mexlight and IEnSA because they represent a major portion of the powier sector and their financial situation would be representative of the sectoris status. 'The denominator for the return calculations is the annual average of fixed assets in operation, excluding work in progress, net of the accumulated reserve for depreciation, retirements and replacements. The bases for the computations were the 1962 year-end figures,to which were added the construction expenditures given in the respective programs; capitalized interest was considered to the extent that informa- tion on it was available. The historic figures are given at original cost as required by the IMexican electricity legislation; tlis tends to understate investments made prior to previous peso devaluations. The accumulated reserves for depreciation were also taken from the 1962 statements without regard to their actual adequacy. It should be noted that CFE provided in the past only for a retirement and replace- ment reserve (instead of proper depreciation), pursuant to the provisions of the 'Mexican rate legislation; the accumulated reserve is therefore much below an adequate anount. Revenues and operating costs were taken, with minor adjustments for consistency, from the reports submitted by the power entities in January 196h. TAB'E 1 Mexico COMISION FEDERAL DE ELECTRICIDAD GENERATING PLANT CAPACITY KW K F~~~~~~~~~~~~~~~~~~~~~~~~[ ] !,~~~~~~~~~~~~~~8 .,1:~~~~~~~~~~~~~~~~~~~1: s11111.6 o:~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4 Extract fromr Annual Report 1961-1962 J ULY i 96o3 Comistion Federal de Eklecricided Io t AD i%J 2 iii TABLE 2 1.._2O COMTSTIAK> ':r o: 4|s r. c~ ' . S'j7U4ARY 07' RRT O ' RE77 'D -?JES -----1963 ----------------1964 ----- ---- --------- 1965 --- 9;---- -- - thOuusands thiousands thOusands thousands thousands thousands thcusands thousands Bulk Sales to: kwh Pesos kwh PCsos_ kw-Th Pesos kwh PesoS IEMSA 1,262,800 1??,466 1,09,100 1583,h !7J, -'r'.9,26 1,570,600 165,872 Mexlight 2,368,orOO 303,760 2, 10,000 396,0n0 [,336,000 520,960 LI,r,O0o0 39,8h3 Affi1iated Cormpanies 675,000 97,374 11,8T,900 17568 1,269,400 ?D?,p32 1,372,200 222,886 Other Coupanies _,7b.00 °°O j7000 -1 I 716 1,1,000 2_238 17,00 30,036 Total Bulk Sales L,379,800 c32,7k 5,50,00 602,333 3%200 927,656 7,5'21,8C0O 95'8,6314 Total Retail Seles ln,57! 3,O-8,973 _ 0 _ 7120 _992 I !oPJ 923, 516 Grand Total -"I Sles, 6 JS27!fLI 1)) 3 32 86.2973 1L372,863 10,925,499 1L52,5h8 511 (30 1,882,150 --167----- _____ ---1968 --------- -- 1969 - - _ thous8nds thousands thousands thousands thousands thousands thousards thousands kwh Pesos kwh _Pesos kh Pesos khv _ Pesos Bulk Sales to: IEM3A 1,'L1c,6 , 19h4,305 1,966,200 207,150 2,094,PnO 2?2,92L 2,U91,300 25h,8002 MexJiaht 5,315,0con f,10,120 5,360,ooo 561,920 6,500,^Oo £65,60o 6,5;0o,o0o 665,6oo f :Lliatetd Comparnies 1,'43,5C0 250,8h5 1,697,200 277,560 1,862,300 306,891 2,C)41,000 336,557 rther Cmr-panies 9Ls,eTo 32,392 220.000 3F,9 279,00 _ >,533 2483a0 17,175 Totea]. Bulk Sales ,8, 9-,100 l1',037?, 2,T:3400 1,83,3Oi2 10,706,100 1,234,933 11,235,300 1,304,1314 otal Retail Sales 4, 3L 99,4039 L,669.610 1 ?2936 5 ,012,019 l,1l5035 10,2 0 1,233,035 (,rand Tota'l All S ues 2, 2,171 13 o 0710 L 7,2' l 2,37 ,973 @ o 5).0 Z ,169 TABLE 3 CCM.ISIO\14 FEDTERAL D E EIMTRICT DAD P0VJLR PROGRAi4 1963-66 Generating Plants Under Construction __ ,_ _ e- Scheduled System Plant pe Capacity Operati.ng 14W Date Central Valle de M4exico Steam 1 x 150 = 150 February 1963 San Bartolo Hydro 1 x 20 = 20 January 1964 Infiernillo ilydro h x 150 = 600 .July 1964 Puebla-VJeracruz Poza Rica Steaa 3 x 39 - 117 January 1963 IlLichoacan-Chapala Santa Rosa Hydro 2 x 30 = 60 January 1964 Guana.juato Salamanca (I)_' Thermal 1 x 75 = 75 January 1966 Torreon-(Thim.ahn eln Gir as StIain 3 x 33= 99 Decenmher 1963 .qrnora-iq;nl n Ianao na ydrfo 2 x 7 1= M1 Iv 19.3 27 de Septiembre Hydro 1 x 20 = 20 October 1963 ElW.\4ovillo 'Iydro 2 x 1h5 = 90 J,ine 196)4 Falcon ,- onterr,.Ir= Niontr Ie I3nT,,-,r v 75= JImy 1963 Fal~JJr.Lħ~' T ~ * - - £\14.ħ .L,. J. S a i i I- Rio Bravo-Nava Rio Bravo Steam 2 x 37.5= 75 January 1964 Xa-v-a Steam 1 x I7 3. Jun (96.T,i IIGL V X ~~~, I ~ -_- I *~ Colotlipta-ALC ap,u-lco LaC1 'el-Ia Li'yd 5A. x 0 Ctbr16 Mie.-idap NlaciLL -ocOm, (Extension) Steam 1 x 16.5= 16.5 July 1965 Tijuana-Iiexicali Tiiuana Steam 4 x 75 = 300 June 1963 llinatitlan Chilapan Hydro 2 x 9 = 18 June ]964 .1r_a 4tl. Gas ) 2 , x 17 C AT,5=, 35 J au 19t [x r"naitU.UJ.LvLCUL u.co / .c. *~ -I *),? .d.' U J Turbine) Total 1,482 T11W I/.0-4- 1A _ } . . . f I . _ . _ . _ 1 _ J L 1_ _~~~~3 4. . L1 __ 4- A .an 1/ Later information inuicaedeu toat en proe had been i ate ad ' wTill be deleted. Table 3: Substationsand Transmission Lines Under Construction (Cont:d) i'ransformer and Total Trans- ħlransmission Transmission former Capa- Lines Length Line Voltago (IKV) city (KVA) (KIM) Substations 380/220/13.2 780,coo - 220/85 650,000 _ 161/69/13.8 267,000 150/69/13.2 15,000 _ 138/13.8 115,C00 - 115/69 487,300 - 69/6.6 151,300 - 3L.5/13.8 30,000 - Trans,mission Lines 38o - 660 220 - 815 161 - 775 150 _ 80 138 - 35 115 - 1,686 69 - 1,018 34.5 - 245 TARTLE LI COMISION FEDERAL DE ELECTRICIDAD SUMMARY OF INSTALLED GENERATING CAPACITY AND FORECAST DEMANDS BY SYSTEMS 1963-1970 Rt Te^. 10a1 1OAA I 1. O IOAA 10A7 o~ AA 1Q -Q70 Central Installed Capacity MW 1,304 1,602 1,709 1,660 1,709 1,709 1,999 1,999 Firm Capacity MW 1,154 1,453 1,559 1,510 1,559 1,559 1,8t49 1,849 Estimated Demand MW 1,003 1,074 1,177 1,270 1,371 1,s481 1,600 1,731 Excess Firm. Capacity KW 151 379 382 240 188 78 V49 118 Puebla-Veracruz- Installed Capacity MW 388.9 388.9 490.9 542.9 832.7 832.7 780.1 930.1 Mal Paso- Firm Capacity MW 350.4 350.4 438.9 490.9 682.1 682.1 630.1 780.1 Minatitlar, ~~ErstiMm,ated Der--,d 4 285_ 2 423 (4V6 56 59 fi2 65 Excess Firm Capacity MW 65.4 30.4 15.9 29.9 115.1 89.1 5.1 122.1 Michoacan-Chapala- Installed Capacity MW 309 378 378 378 448 448 518 518 Firm,i Capacity MW 2k47. 3I 3I 3 I a 37 37 8 1L8 1 0 Il *L s11 MNfiS n C4 J14.. _34J )14V )u ) ru au 04v Estimated Demand MW 261 300 325 343 370 393 19g 448 Excess Firm Capacity MW 13 43 18 5 8 -15 29 - Torreon-Chihua,.ua-,, - r.- stle -aat nW - 2 256 r56 25g 2u6 2-3 2-vMC 286 J~~UI~LLLZILLWIL. JJ1Zbdħi.L.UX wt5JtfIħL k)'i CICU 2 LOO ~U410 40 0 UU CIA. Firm Capacity mW 155 196 196 196 226 226 226 226 Estimated Demand MW 1,155 160 165 169 174 178 2.82 187 Excess Firm Capacity MW - 36 31 27 52 48 34 39 Sonora-Sinaloa Installed Capacity MW 220 265 265 265 265 265 3.05 305 Firm Capacity MW 175 220 220 220 220 220 260 260 Estimated Demand MW 120 135 150 165 180 200 225 250 Excess Firm Capacity KW 55 8O 70 55 4I 20 35 10 Falcon-Monterrey- Installed Capacity MW 365 461 461 461 461 461 L61 461 Rio Bravo-Nava Firm Capacity MW 290 386 386 386 386 386 3.86 386 Estimated Demand MW 1140 205 225 255 285 315 250 386 Jxcess .irw Capacity MW 150 181 161 131 101 71 36 - Colotlipa-Acapulco Installed Capacity MW 35 5g 53 53 53 53 75 75 Firm Capacity MW 27.5 45.5 45.5 45.5 45.5 45.5 53 53 Est;L-.ated Demand MW 21.5 25.5 31 IE 1. 1. 1 505 Excess Firm Capacity MW 6.o 20.0 14.5 9.5 5.5 1.5 3 -2 Yucatan Installed Capacity MW 31 31 44.5 44.5 61 61 61 61 Firm Capacity- Kw 25. 1 25.1 228J.C Ll.5 L'.5 L.LA Estimated Demand MW 25.0 27.5 30 32.5 35 39 42 45 Excess Firm Capacity MW 0.1 -1.6 -2 -4.5 9.5 5.5 2.5 -0.5 Tijuana Installed Capacity MW 150 225 225 300 300 300 300 375 Firm Capacity MW 80 150 150 225 225 225 225 300 Estimated Demand MW 120 140 150 160 177 192 210 230 Excess Firm Capacity MW .Is 10 - 65 48 33 15 70 Minatitlan Installed Capacity MW 29 62 Firm Capacity MW 23 61 Estimated Demand NW 20 50 System interconnected with Puebla-Veracruz Excer.- p4 - Cape'itj MW 3 11 TABLE 5 POWER SECTOR 1963-1965 Investment Programi! (in millions of pesos) Total Entity Item 1963 1964 1965 1963-65 CFE (1) ilants and other facilities inder construction 1,827,0 1,494.6 1,136. ,458.0 (2) Frequency change - 108.8 162.5 271.3 (3) Continzencies' - 80.0 130.0 210.0 Total 1,827.0 1,683.h 1428.9 4,939.3 IMIiSA Total 120.6 337.3 197.7 655.6 Ch,apala Total 28.3 22.8 22.0 73.1 Su -totl 1, 977.7 2,04 7T=Xvz5Zu: 5,6. GUU AkLd 7L -I7 2G. C.J4-) a 3.u U,LU.V U.Z., LI JL ,s v . I L - ' v 1/ This presentation is based on revised information received from the respective entities in January l964 thirough CFE. The 1963 figures are in part actual and in part estimated. 2/ Contingencies for CFE were computed at 5 percent in 1964 and 10 percent thereafter. The Ilexlight figures include a 10 percent overall contingency and provide for increases in labor cost. TABLE 6 POWER SECT0O-I 1963-1965 Alternate InvestmentPogram_/ (in millions of pesos) Total Entity Item 1963 1964 1965 193-65 CFE (1) Plants and other facilities under construction 1,827.0 1,350.0 950.0 4,127.0 (2) Frequency change - 60.0 180.0 240.0 (3) Contingencies - 65.o 90.0 155.0 Total 1,827.0 1,h75.0 1,220.0 4,522.0 IaiSA Total 120.6 320.0 180.0 620.6 Chapala Total 28.3 22.8 22.0 73.1 Sub-total 1,975.9 1,817.8 1,422.0 5,215.7 Mlexlight Total 286.0 330.0 330.0 946.0 Grand Total 2,261.9 2,1[k7.8 1,752.0 6,161.7 rArnnual OavdiCg compared to Table 5 288.7 282.8 571.5 1/ Based on an assumedu sppage in C'u E * - program of .,;; sl uzVe progres, on the frequency change; the deletion of La Villita; aind a redtuction in the investment program of IMiSA and Hexlight. (See para. 53). TABLE 7 POWER SECTOR Sources and Ap - catons; of Fun's 1, 1 'Totaj 1963 2/ 1961 1965 1963-65 - in(in llions of pesos) Sources of Funds Internal cash generation 738.9 920.2 1,135.8 2,794..9 Power Consumption Tax 220.0 238.0 258.0 716.,O Government appropriations 382.3 25Li.0 242.1 878,4 Long-term borrowings 3/ 1,537.5 2,000.4 565.0 4,102,,9 Miscellaneous sources 307 . 102.9 158.0 568.,3 Total Sourcesof Funds 3,186.1 3,515.5 2,358.9 9,060,5 Applications of Funds Construction expenditures 2,261.9 2,436.5 2;034.8 6,733.2 Debt service 66821 828.3 992.2 2,488.b6 Miscellaneous applications 256.1 984.4 55.2 1,295.7 Total Applications of Funds 3,186.1 1,249.2 3,082.2 10,517.5 Financing gap - (733.7) (723.3) (1,h57. 0) 1/ mts submitted bv the Mexican Dower entities in Januarv 1961, 2/ Partially estimiated 3/ TIncluldes Yvex560n mnllion medium-+erm refinancing of CFEIs short- term debt and continuing advances by NAFIN to CFE for debt TABET 8 FiUER S: CTC2 Sources and Appl1cationz of Funjs 196h4 & 1965 1964 1965 Total (in rilions of pesos) 1964-65 Sources of Funds Int^rnal cash generatiot) 920.2 1,135.3 2,056.0 Power Consunotion Tax 313.0 516.0 829.0 Government appropriations 254.0 242.1 496.1 Long term borrotangs: IBRD Loan 316 iZ 495.4 138.0 683.4 Refinancin7 of CFE 's shlort-ter. debt 1/ 600.0 - 600o. Refinancinr, of .iexli-,ht's short-, term debt 3/ 400.0 -_ 400.0 Drat3 dotmn of other lonr term debt (suo-lierIs credits) 319.3 175.0 _/ h94.3 Advances b7 ri.fEAPIN for debt service of C7I's (suoplier's credits) 397.7 - 39707 idscellaneous 102e9 158.0 260.9 Additional long term borrorin2s covPriing foreign component not yet financed - 350.0 350.0 Totnl Sources o.f Funds 3 2j?r-7 6;567 - Appnlication of 7un.ds Con-st+ructiron 9 --penit1 J. 7 - R 1 75290 3,9-9. Debt service on medium and long term debt 8)6.5 0l-92.7 1 93 =2 Interest on news long term borrowings - 9.5 9.5 Repa..ment of short term debt (inrclud- ing interest) 922.2 - 922.2 1^ Cne ozric ^o; +4rw;c 9nQ {o CC O 117 1. rp~~4..,, ~ ~ ~~' T~',,r,At, ') O'7P ~_ 9- ') 000 I. A R TotV~ 5 tpplicati . o ~ J.f II I 3 3/ -.7 ,094 C-,.ual^ surplus or (dfct ""o(Ll v)()7 A'J UMLUIC.. AJ. L4i. UIZ jJħU XkA. ~ U V W.L J. UL j Uħ J %1j *_I kJ4 funds (176.2) (320.7) ~/ A~UUħI1 &.LUrI1dt~ .A1V~ r 1Iesti-re pi bEifl iUL1JE LEI ħLau-Le u. g/ 10,5 of retail billings in 1963 raised to 20;5 in last quarter of 1964. 3j/ Assumed terms 3 to 5 years 7 T / 2Tex -Sybetra/Siemens credits. TABLE 9 POW1Er4 SOCTOR Return Calculations 1963-1965 Total 1963 1964 1965 1963465 - _ (in m-llions of pesos) Average net fixed assets in operation: CFE 5,704 8I,015 10,594 Mexlight 2,g464 2.,750 3.,080 IEMSA 1,405 1,590 1,806 Total average net fixed assets 9,573 12,735 )5,780 Operating results: CFE: Operating revenues 985 1,263 1)512 Operating cost 589 697 776 Depreciation 134 206 246 Net income from operation 27-2 360 1490 1.112 Mexlight?: Oerating revenues )net = 1176 1,281 Operating cost ) 186 984 1,067 nenrecintion 61 68 Net income from operation 12H 131 1f6 405 IEMSA: Operating revenues 534 578 617 nOperating cost 1422 1472 1487 Depreciation 34 37 46 Net in- nr, from operation 7H 7 23 (limn,ltAve net. in-nrnm. of (GFE, Mexlight and IEMSA 468 560 720 1,7148 Return on average net fixed assets Average -I CFEt j~ £4 'IO 44.% L406p/o Mexlight 5.2% 4 8o 1o4.7% TM6C A '°5% I. e 4.6 Plower Sector (cum-,ula 4ve)r- 41°, rIe5 1. 6% 4. 7% VIU_AU~ £JJ. J.AJ/o r'nJ. LmLflIetlU I i N1A _n 1.)o , Rteuurn incIuding proceeds oif itax 7.2% 0 4lo 0.3% 060% -IOMA-o0 1E. SSE 0;'. G-OAO 000 P1.1k1 - VEMMOMOT SYSTEM T,'. METICO OMO I. I. 05.00 5EOOO0 .00 0 Po.TS 'A ,- ~--~ooo.( TqunaMedMllI 00 1 3590 System GOMISION FEDERAL DE ELECTFRICICDAD SOR- 100 SYSTEM , t .O0050 200 o.70010 SO 0.SoAouo.5 ~~000T,~~~~~. P0000 MAJOR SYSTEMS ~~~~~~~~~~~~~~~~~T'M~~~~~' Sot ~~~~~~0,00O El MoTtoJOR SY TEM 001. A. . £TM Tg P oo,od SE.O ,o IESO s.MTo. 000 lT o o, S T0000M 9800 00. CMI10 OOT 000. `OM Ro,i: E. S TOO ~~OJ0TOT05 O-Oydoo PSTTTOS oE00100000 4.000 ~ , 5900$000000M. 0.000 II El OMOOMP9 10,00 yd,. I-t~~~~~~~~~~ s Z~~~~ 07 d LR~ . I. 1980 MO SMAOPON .00 TT OMMT,0 ~~~~~~~---i t'\~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A--O system ,.yse ' Apoooooos 710 70950 00,0 0.0 I'.Th0n1 IT EToMooRo. ST. Oooooo 2.0CR TT..... ooo12.200 System Too-. I. 05. 800 TOo. OM4T To. 000.000~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IN-E~ 3. 7_orreon-.Ch,hvohvu Mg~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~000070 000 -N-TTT00T 088 S., JooMd-.3,000 0900000 TOSOH - 80NTEMME0 OSOTTO MO.~~~~~~~~~~~~~~~1 Tq.- TOO~ 7 1. ~~~~~~~21 Al I 00001 TA Ro oo.,o .00 0.hT,ooo . ooo / ~ ~ ~ ~ ~ . 000050000 009.000~~~~~~~, - 00 Meo L.3S TNO 0 oooo0 I~~~~~~~~~~~~~~ ~~~~~~~~~ 20 0.OOo TMl NOMT R.8 20 25~~~~~~~~~~~~. , BooToz 75,000 50 .-- 39.6 2.8 00 Ed~~~~~~~~~ ~ ~~~.-NAOo -T 5.0 000 AT2d ,88 j~~~0000 ,~~~~ N. 80,. R.o S,.oo to 0,180~~~~~~SytemL. OmNJAT Ob A0 To,oS o 2,300 Fclcoo-tofonterrey', T ST~~~~~~~~~~~~~~~~~11 Pooo ... 0. R G00-.023T 4,00 System '00 50 Lo Pyotem 08 80no000 ,0 Mooolloo 000.0-TO '0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~!I-- ~ A '.w el. AN~~~~~~~~~~~~~~~~~I PooO I00 2380 9 1 W..L.08 -,000 000.08 System wi '~~~~~~~~~~~8. ..boom 1d08 'O~~~~~~~~~~~~~~~E 20000000900-t AFIChocco0 Chapalao (U To 0 Guanajucat System ie" 65. 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