New Market Study Published: Mexico Power Report Q2 2013

New Energy research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 05 March 2013

BMI View: Although Mexico's weaker economic outlook in 2013 has the potential to weigh on the power sector's growth and profitability, its booming manufacturing sector, increasingly strong private consumer and favourable demographics support an optimistic long-term growth outlook for the country and for its power sector. That said, we believe that the passage of substantive energy sector reforms will be crucial in determining the future of the country's oil & gas sector and will play a role in shaping its electricity mix. Most notably, while we continue to hold the view that gas generation will strengthen its dominant position, with cheap gas in the region fuelling the development of new type of capacity, we highlight that Mexico continues to make progresses in its renewable expansion, in line with its General Law on Climate Change.

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/541240_mexico_power_report_q2_2013.aspx?afid=201) (http://www.fastmr.com/prod/541240_mexico_power_report_q2_2013.aspx?afid=201)

We remain of the view that an estimated robust 3.07% year-on-year (y-o-y) growth for power consumption in 2012 will give way to a slightly less positive performance in 2013. With increased uncertainty as a result of a slowdown in the Mexican economy weighting on the sector, we believe that consumption growth will come in at a more modest 2.44% y-o-y in 2013. This more cautious short-term stance notwithstanding, over a multi-year time horizon we are more sanguine on the sector's prospects for growth and profitability. This outlook is underpinned not only by positive demographic and macroeconomic fundamentals, but also by sector specific dynamics. First of all, the country's low per capita consumption and relatively high energy intensity suggest that risks for long-term electricity demand are on the upside. In addition, approval of the General Law on Climate Change in 2012 as well as Nieto's government proposal to increase in investment in the electricity sector and allocate MXN269bn for the Federal Electricity Commission (CFE) signal substantial commitment to the sector.

This outlook is fully corroborated by expectations from BMI's Infrastructure analysts, who anticipate strong growth in the utilities sector, with significant investment directed to power plants and transmission and distribution grids over the medium term. That said, with Mexico relatively well placed compared to some of its regional peers in terms of its power generating infrastructure, we reiterate our view that, while new investments will be necessary to substitute ageing capacity and meet growing demand, attempts to diversify the energy mix will be a key component and driver of capacity expansion and refurbishment programmes.

From this perspective, we notice that:

- A muted outlook for the oil sector raises some questions concerning the origin of the sources used in power generation. As such, a potential energy sector liberalisation will play a key role in influencing future dynamics and shaping upside and downside risks for the power sector as a whole as well as for different generation segments.
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