EconomyFinancialThe absence of renewable projects is damaging the credit...

The absence of renewable projects is damaging the credit profile of the CFE

The shortage of new projects for the construction of renewable plants and the plan of the state CFE to continue with the promotion of fossil fuels is already damaging its credit profile.

Last Tuesday the rating agency The downgrade is mainly explained by the reduction in the sovereign rating announced by the agency last Friday. But Moody’s has also taken into account the intrinsic performance of the state-owned company – independent of federal finances – and decided to lower its base credit assessment of the company from “ba2” to “ba3”.

The agency argues that the latter has been the result of a weaker credit position of the state company in the midst of an environment of high energy prices – caused by the conflict in Russia and Ukraine and the changes in production and consumption patterns generated by the pandemic. The company’s decision not to invest in plants that do not use fossil fuels –mainly gas– and to stop private investments is tying it to price fluctuations in international markets and the situation is not likely to change in the short term.

The historic increase in energy prices is affecting all companies internationally. But companies, such as the CFE, that have avoided pluralizing their investments have a higher level of exposure. The state company generates about half of the electricity it sells with natural gas, which is mostly imported. “A lack of diversification of your energy matrix or continuing to rely on fossil fuels is a risk that is now materializing in the numbers,” says Adrián Garza, Moody’s lead infrastructure analyst in an interview. “ The underlying problem is a high exposure to natural gas prices , to natural gas imports”.

The company will announce its financial results for the second quarter of the year next week, in which the impact that the price of gas – which has reached historic levels in recent months – has had on its finances can be made tangible. Moody’s already anticipates that the company will report a negative EBITDA in the rest of the year and maintain a weak financial performance in the next 18 to 24 months.

The agency estimates that natural gas prices will remain well above historical prices in 2022 with a gradual reduction in 2023, which will continue to put pressure on the state company’s operating costs. Already in the first quarter the company spent 31% more on the purchase of fuel compared to the same period a year earlier.

The state-owned company has decided to opt for new combined-cycle power plants – which work on gas – and give a second life to some of its plants that were already scheduled to go out of operation, so far only one photovoltaic project has been made public in the North of the country. “In addition to this solar park in Sonora, there is no pipeline of new renewable energy projects. So what is this causing? That the exposure to natural gas or the dependency on natural gas remain high,” says Garza.

The CFE defended in a press release that it is strengthening new lines of business to increase its income and reduce its risks. “Although there have been temporary, exogenous and short-term factors that are not exclusive to the CFE, its technical, operational, human and financial foundations remain solid,” reads a note.

Moody’s, says Garza, has no plans to lower the company’s credit rating further, at least in the next two years. But he already anticipates that the little investment that has been made during the current government will create higher costs for the company and increase its investment needs in the medium term.

Last minute: Moody's warns that the Mexican peso will fall to 24 per dollar

The warning comes as Mexico's currency has weathered the "super dollar" phenomenon, which this year has pushed the euro and sterling to record lows.

LAST MINUTE: Enel wants to migrate its self-supply plants; it has already started conversations...

The company, one of the great winners of the electricity auctions of the past administration, has 19 plants in the country. Three of them work with a self-supply permit.

#GuacamayaLeaks: The AIFA recognizes the risk of data breaches at CFE Telecom WiFi points

The new airport entered into an agreement with the state telecommunications company to install Wi-Fi points, but recognizes the risk of user information being compromised on these networks.

Another one: The CFE loses an arbitration process against the Spanish company Duro Felguera

The ruling has brought with it a payment that the CFE must make to the private company of around 22 million dollars.

A break for the Afores, they could have a better year in yields in...

After this year the Afores have been affected by losses of more than 300,000 million pesos, Moody's estimates that this trend will lessen in 2023.

More