...Challenging Transition to Competitive Market: Mexico's energy reform will be challenging for both Comisi=n Federal de Electricidad (CFE) and the government, as the reform creates an open and competitive electricity market. Increased competition could force CFE to lower industrial electricity rates or lose industrial load to new private investors (NPIs), which could pressure cash flow generation. Industrial consumers are CFE's highest margin contributor given the high level of cross subsidies embedded in CFE's tariff structure. Improving Competitiveness Is Key: CFE must improve its competiveness to be able to compete in an open market and avoid the need to receive direct cash support from central government, which is an uncertain scenario. CFE can become more competitive by lowering costs and reducing losses. Fitch Ratings believes it is unlikely that the company will receive an improved tariff structure with higher residential and agricultural rates given the high political cost of making...
