More Mexican Cos Head Toward Private Power Generation
Dow Jones & Company, Inc.
MEXICO CITY (Dow Jones)--Frustrated by high electricity prices during peak hours, more than 30 companies have come together in Mexico's northern industrial city of Monterrey to generate their own power.
"This idea came about from a combination of concerns and necessities of several companies," said Luis Flores, director of the Genermex project and long- time executive at Grupo Garza Ponce, an industrial conglomerate that's spearheading the power generation project.
Mexico's energy regulators gave the consortium the green light in late 2002 to generate 125 megawatts of electricity. The companies in the consortium can tap into the power source as needed, Flores said.
Construction of the plant will begin in the first quarter of next year, and is expected to require $130 million in investment. The consortium plans to use natural gas turbines supplied by General Electric, and the plant should take nearly two years to build.
Mexico's electricity industry was nationalized in 1960, but the country's laws allow private companies to generate their own power.
Several big companies with large energy needs, such as cement giant Cemex SA ( CX) and mining company Industrias Penoles SA (PENOLES.MX), have built their own power plants, but they are barred from selling excess capacity.
Government efforts to expand private involvement in the sector through a constitutional amendment have been rejected by the opposition-dominated Congress.
Smaller companies have the option of investing in microturbines to produce a megawatt or so of electricity, or of joining a consortium. Consortium projects, though, are complicated by financing and equity issues, since the members often have varied energy needs and credit quality.
"This (power generation) is just going to be a big, big issue because there's really not a clear cut solution here," said John Padilla, a director at the IPD Latin America energy consultancy.
Flores said the Genermex consortium hopes to finalize its list of members shortly after the New Year. Possible members include manufacturers of autoparts and telecommunications equipment, among others.
-By Amy Guthrie, Dow Jones Newswires; (5255) 5080-3453; amy.guthrie@dowjones.com