SÁNCHEZ DEVANNY ESEVERRI

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MEXICAN REGULATIONS REGARDING RENEWABLE SOURCES OF ENERGY Federal Law for the Public Service of Electric Power (“LFSPEE”) Regulations to the LFSPEE

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CRE Incentives for Renewable Sources of Energy DOF September 7, 2001: a) Methodology to determine transmission charges concerning renewable energy sources; b) Model of Interconnection Agreements concerning renewable energy sources; c) Model of the Transmission Services Agreements concerning renewable energy sources. Agreements approved by the CRE to be executed by and between Permit Holders and the CFE and/or LFC. RES/140/2001

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Permits under the LFSPEE Independent Power Producer Currently 5,256 MW. 16 Permits in operation 25 year contract with CFE Best economical proposal wins. Co-generation / Self-Supply Currently 19,937 GWh. 162 Permits in operation Currently same regulations apply to both. Surplus can be sold to the CFE, up to 20MW

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Export Currently 15,542 GWh. 5 Export Permits Import Currently 153 MW. 8 Import permits Small Production Currently Under 30MW – Export – CFE Under 1 MW – Rural Communities – Isolated Areas

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Current Renewable Energy Production in México Current Renewable Energy Capacity 10,562 MW Potential for growth in proven Renewable Energy Sources 8,252 MW.

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CURRENT RENEWABLE ENERGY PROJECTS IN MEXICO Eléctrica del Valle de México, S. de R.L. de C.V. Self Supply Permit Holder. Usufruct of land Agreement with four regional “ejidos”. Surrounding Municipalities are Associate Members. 67.5 MW Production in its first stage. Approximate 30% savings for member municipalities. CFE and LFC still not sure on how to implement interconnection and transmission agreements. Problems with SUTERM trying to integrate workers. The State of Oaxaca expects for 12 private Mexican and international companies to have a total production of 1,350 wind power MW by 2010. CFE has studies that prove a potential for growth in Wind Power Generation of + 5,500 MW. WIND POWER

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CURRENT RENEWABLE ENERGY PROJECTS IN MEXICO GEOTHERMAL POWER Mexico currently holds the third place in Geothermal Power Generation, behind the U.S. and Philippines. The power plants of Cerro Prieto in Baja California, Los Azufres I & II in Michoacan, Humeros in Puebla, Tres Vírgenes in Baja California Sur and La Primavera in Jalisco currently have 855 MW of installed capacity. The geothermal field of Cerro Prieto in Baja California is the second largest geothermal field in the world. The CFE has studies that prove a potential for growth in Geothermal Power Generation of 123 MW.

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CURRENT RENEWABLE ENERGY PROJECTS IN MEXICO HYDROELECTIC POWER 23.24% of Mexico’s installed Capacity comes from Hydroelectric Plants That is  9,378.82 MW  “El Cajón” Power Plant On March 14, 2003 the CFE executed the construction agreement for the El Cajón Hydroelectric Power Plant. The agreement was awarded to “Constructora Internacional de Infraestructura” a joint venture of Ingenieros Civiles Asociados, Promotora e Inversora Adisa, La Peninsular Compañía Constructora and Energo Machexport-Power Machines. El Cajón will provide 750 MW of installed Capacity with two turbo generating units. El Cajón is expected to be in full operation by April 2007.

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CURRENT RENEWABLE ENERGY PROJECTS IN MEXICO SOLAR ENERGY Mexico currently produces a total of less than 14 MW from Solar Energy It is estimated that most of the Mexican surface area receives up to 5kWh/m2-day of isolation. The northeast portion of the Mexican Republic is specially well endowed with continuous isolation. The CFE estimates a potential growth of up to 13 MW in Solar Power Generation in the next 10 years.

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CHALLENGES TO THE MEXICAN RENEWABLE ENERGY MARKET Uncertainty regarding legal reforms. Lack of internalization of environmental costs by the CFE. Need for greater investment by the private sector.