Current energy policy has damaged “investor confidence and created ongoing regulatory uncertainties,” Moody’s said in a report on Thursday.
The national transmission infrastructure has shown higher levels of congestion, which limits interregional connectivity. On the other hand, the scarcity of water in the Mexican industrial centers closest to the United States discourages further investment related to nearshoring, the firm says.
The federal government’s energy policy, which favors the Federal Electricity Commission (CFE), has been an obstacle to the development of private renewable generation projects, Moody’s adds.
In Mexico, access to renewable energy continues to be limited, on the contrary, multinationals continue with their sustainable production processes and their decarbonization objectives.
Last year, Mexico generated only about 22% of its total electricity from renewable accounts, falling short of a commitment to generate 35% for next year, topping only India’s 19%.
Brazil topped the list of electricity generation from renewable sources with 91.2%.
The investment potential in nearshoring in the country would increase with a public policy that gives priority to renewable generation and encourages private investment. In addition, higher electricity demand and lower capex charges would benefit CFE’s credit quality, Moody’s said.
The perceived stability of the Mexican regulatory framework would also support the credit quality of power regulation issuers such as Cometa Energía, Electricidad Firme de Mex Hold, Fe Energy VI and México Generadora de Electricidad.
Another of the limitations, according to Moody’s, has to do with industrial spaces, which currently have a 98% occupancy rate. Both they and the tenants need reliable access to the country’s electrical infrastructure, which currently cannot keep up with growing demand.
Climatic risks, associated with lack of water and droughts, can hinder manufacturing, a productive sector located in the center-north and north of the country; the two regions are “vulnerable to the risks of water stress,” he noted.
For production and manufacturing companies, water is a “critical component”. The lack of water can only be partially mitigated with the use of recycled water and with a more efficient use of this resource.
