1 / 5

Project Tex-Mex 11/27/00

Project Tex-Mex 11/27/00. THE OPPORTUNITY. MEXICO MARKET Comisión Federal de Electricidad (“CFE”) has enjoyed a monopoly in the electric power sector for decades, although reforms instituted in 1992 allow independent power producers - IPPs - and cogenerators to sell power to CFE.

ralph
Download Presentation

Project Tex-Mex 11/27/00

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Project Tex-Mex11/27/00

  2. THE OPPORTUNITY MEXICO MARKET • Comisión Federal de Electricidad (“CFE”) has enjoyed a monopoly in the electric power sector for decades, although reforms instituted in 1992 allow independent power producers - IPPs - and cogenerators to sell power to CFE. • Although Mexico's generation of electricity has increased greatly over the past decade, its supply is not expected to meet projected demand growth (approx. 6% annually) over the next ten years. This means that Mexico must increase its generation capacity by more than 13,000 megawatts,or approximately one-third of existing capacity, over the next six years, and augment the corresponding transmission and distribution capacities. • Mexico's energy ministry believes about 13 GW of electric generating capacity and about $25 billion of investment are needed through 2006, and $50 billion over 10 years, to keep pace with demand. • Growing concern about possible power blackouts in the near term has spawned a huge growth in the sale of uninterruptible power systems in Mexico. Sources: Energy Minister: Luis Tellez Kuenzler Deputy Secretary For Energy Policy and Development: Jorge Chávez Presa MEXICAN POWER PURCHASE AGREEMENTS • ENA Mexico has negotiated a memorandum of understanding (“MOU”) with DeAcero, S.A. de C.V., Mexican industrial company; creating an initial short power position of 112MW as of [2/1/02]. • Under the anticipated final agreements, ENA will deliver to DeAcero : • 7 X 24 firm baseload power for 15 years; and • 100% guaranteed availability/year to customer (ENA has the option to call back up to 5% of annual MWh). • In exchange for receiving more reliable power, DeAcero will pay ENA: • $7.00/kW-month escalating capacity payment (demand charge) - - average $10.12 over 15 years; and • Energy at a price based on an 8750 Btu/KWh heat rate and a gas index price (Tetco S. Tx.). • DeAcero is responsible for executing agreement with CFE providing for wheeling of power from the delivery point in ERCOT to DeAcero’s locations in Mexico.

  3. THE ASSET HIGH VOLTAGE DIRECT CURRENT TIE (“HVDC TIE”) • In order to safely transmit power between the ERCOT and CFE transmission grids, ERCOT AC power must be converted to direct current (“DC”) power, then reconverted to AC power synchronized to the CFE transmission grid. (This will keep problems in one grid from affecting the other.) • An HVDC Tie would give ENA the ability to import/export up to 300MW of power safely without adversely affecting either the ERCOT or CFE transmission grids. • In order to construct the HVDC Tie and reserve 100% of the transmission across it without triggering PUCA jurisdiction, ENA has entered into the following agreements: • Engineering, Procurement, and Construction Contract with ABB providing for the delivery of an HVDC Tie approximately 16 months after notice to proceed is given; and • Participation Agreement requiring Brownsville Public Utility Board to , among other things, (i) provide right of way for the HVDC Tie and associated transmission lines, (ii) take ownership of the HVDC Tie upon completion of construction (iii) provide ENA with 25 years of transmission service in exchange for ENA’s financing (via a special purpose, off-balance sheet financing vehicle) of the HVDC Tie. HVDC Tie EPC Contract $49.5 MM Substation Substation AC in Phase with ERCOT AC in Phase with CFE Mexico U.S. DC DC Additional transmission construction and AC cable cost necessary to interconnect ERCOT and CFE ~ $15.5MM

  4. VALUE PROPOSITION

  5. TRANSACTION UPSIDE • Additional similarly structured PPA’s are expected (MOUs for an additional 135-160MWs have been executed), creating an eventual short position of up to [300MW]. • ENA intends to supply the entire 300MW short position by wheeling in power from the Texas power market (“ERCOT”) where a generation oversupply situation is expected to exist after 2003. • Any excess capacity on the HVDC Tie could be sold on the “spot” market. Transmission on the closest comparable, a 36 MW HVDC Tie located at Eagle Pass (approximately 300 miles north) currently trades for approximately $14.00/MWh. (Note that this comparable, due to its size, is not a perfect comparable in many respects. However, given the HVDC Tie’s capital costs of $1/MWh, significant upside exists if only 50% of the comparable value is achieved.) • ENA has created a strong relationship with BPUB during this process. When and if additional expected demand materializes, ENA will have a “first mover” advantage at a key strategic beachhead into the Mexican power market.

More Related