WIRE:05/18/2000 15:54:00 ET Mexico redoubling efforts to meet energy crunch

MEXICO CITY, May 18 (Reuters) - Mexico is moving to speed up the construction of new power generation plants in a bid to satisfy energy demands growing at a breakneck pace of more than 7 percent year-on-year, a senior energy official said on Thursday. Deputy Energy Secretary Mauricio Toussaint told reporters the government -- which runs the nation's electricity, oil and gas industries -- is trying to accelerate the award of new licenses for outside power projects and quicken the execution of existing projects to meet the needs of a growing economy.

The scramble to bring new power sources on line comes after a fast-expanding economy sent Mexico's energy demands soaring by 7 to 8 percent in the first quarter.

While this growth slipped slightly to around 6 percent in April, thanks to an activity slowdown over Easter, energy needs for May are on track to resume the growth pace of the first quarter, said Toussaint.

"Our margin of (energy) reserves is at one of its lowest levels in the past few years," said Toussaint, at a breakfast with journalists. "We have to speed the process up."

Mexico's electricity industry was nationalised in 1960, though in recent years the nation has moved to meet strong demand through a string of energy supply contracts to private companies under cogeneration or independent power producer (IPPs) plans.

Toussaint also reiterated the Energy Ministry's call to open up Mexico's electricity industry to private investment.

"If we do not find the sufficient investment flows to generate more electricity, the growth of the country will be limited," Toussaint said.

A proposal from President Ernesto Zedillo's government to liberalise the industry has been stalled in Congress for over a year, a casualty of the July 2 presidential election. Fierce nationalism and opposition to selling off one of the state's "crown jewels" have prevented the reform from progressing.

Zedillo has said Mexico must secure private funds for at least part of the $48 billion needed to upgrade and expand the nation's power grid, or the government will be forced to trim key social programmes.

On the petrochemicals front, Toussaint said there is little hope of Mexico finding a way to lure private investment to its archaic plants before the current government leaves office in December.

Mexico's has made several failed efforts to attract private cash to its decaying petrochemicals plants, but so far companies have balked at the idea of investing in facilities or projects that are controlled by the state.

"Quite frankly, if we haven't found a solution in the past years, it will be very difficult in these few months to find a way out of the problem," Toussaint said.

The energy official said the government has been in talks recently with companies to bring in the cash under a partnership or association programme, but the firms "are not convinced."

http://abcnews.go.com/wire/World/reuters20000518_3371.html

-- Martin Thompson (mthom1927@aol.com), May 18, 2000