By SAM DILLON
MEXICO CITY --
Warning his compatriots that Mexico's energy needs are fast
overwhelming
its state-run power plants, President Ernesto Zedillo urged the nation's
Congress on
Wednesday to approve an extensive restructuring of the country's electric
power
industry, opening
it to private investment.
Zedillo proposed
two constitutional reforms that would reverse Mexico's 1960 nationalization
of the
industry and
allow private companies to invest in the leasing and construction of power
plants and
regional transmission
lines. The national power grid and nuclear plants would remain under
government control,
officials said.
Public ownership
of energy industries has been a central tenet of Mexican nationalism, and
Zedillo
underlined the
urgency of his proposals by announcing them in a nationwide television
broadcast on
Tuesday evening.
Mexico needs
to attract $25 billion in private investment to the electric power industry
over the next
six years, an
amount equivalent to a quarter of the entire budget this year, the president
said. That
investment would
allow Mexico to increase its generating capacity by 36 percent to keep
up with the
explosive demand
for energy resulting from industrialization and population growth.
"We have to do in a few years what before took decades," Zedillo said.
Luis Tellez Kuenzler,
the energy minister, said at a news conference Wednesday that "these reforms
mean the total
opening up of the sector to private investment."
Private analysts
agreed that Zedillo's proposals would, if approved, bring sweeping changes
to the
electricity
industry. They could encourage dozens of U.S. and other foreign companies
to make
major investments,
but how enthusiastically investors enter the market will depend on the
clarity of
the laws passed
to permit the broader access, they said.
Past government
proposals to privatize parts of the petrochemical, natural gas and
electricity-generating
industries have been undermined by policy zigzags and contradictory official
statements,
they added.
Limited changes
to Mexico's energy laws passed in 1992 have allowed two major generating
projects to
date. One, the $647-million Samalayuca 2 generating plant near the border
industrial city
of Juarez and
built by a consortium of U.S. and Mexican companies, went on line in August.
The
other, Merida
2, a $450-million plant in the Yucatan peninsula, is under construction.
Despite numerous
lengthy negotiations between the government and foreign energy companies,
other
projects have
failed to go beyond the proposal stage, partly because the government still
prohibits
private companies
from independently marketing the power they generate. Instead, the private
companies have
been obliged to sell their electricity to Mexico's sprawling government
power utility,
the Federal
Electricity Commission. Zedillo's proposal would break that arrangement
for the first
time.
"This is a big
change," said George Baker, an independent consultant in Houston who studies
the
Mexican energy
industry. "If they're changing the Constitution and allowing investors
in a power plant
to look for
their own industrial customers, so they're not vulnerable to the whims
that come with
having only
one buyer, then it will become a lot easier to attract financing."
Michael T. Burr,
editor of Independent Energy magazine, published in Tulsa, Okla., said
the
proposed changes
would likely prove attractive to the 25 or so energy corporations in the
world
capable of building
and operating major power plants. But he said that attracting $25 billion
in six
years is "really
a lot."
"It's about $4
billion per year, and that's pretty aggressive," Burr added. "It's tough
to rally that kind
of money. I'd
be surprised if they can garner that kind of investment. I'd be awed."
Copyright 1999 The New York Times Company