CONFIDENTIAL

1. CONFIDENTIAL México Country Profile 07.01.20 Government and Regulatory Affairs Caribbean • Central America • Colombia • Mexico • Venezuela This report was prepared by Enron Government Affairs in Mexico and is solely for the use of the Office of the Chairman at Enron Corp.. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval from the Office of the Chairman . This material was used by the the Mexico Government Affairs Group during an oral presentation; it is not a complete record of the discussion.

2. CONTENTS 1. Country Profile • Mexico 5 • Demographics 6 • Economics: 7 • Finance and Development 8 • Economic strategy for 2000 10 • Currency 12 • Government: 13 • Vicente Fox Biography 16 • Political situation: 17 • Investment climate 19 • Barriers to investment 20 • Privatization status 24 2. Energy Profile • Electricity: 26 • The electric industry 27 • Basic indicators of the national electric sector 28 • Industry participation 29 • Main generation centers – 1998 31 • Gross CFE’s electric energy generation 34 • Yearly evolution of capacity installated by CFE 35 • Future expantion of electric infrastructure 36 • Engaged projects in construction process (1999-2008) 37 • Area of the national electric system 39 • Interconnected national power grid 40 • Length of the transmission lines of the national … 41 • Operational efficiency of the national electric sector 42 • Electric privatization status 43

3. CONTENTS • Regulatory summary 44 • Productivity and efficiency in the national electric sector 45 • Labor productivity in the National electric sector 46 • Natural gas: 47 • Natural gas information 48 • Natural gas production and domestic sales 49 • Mexican natural gas market 50 • Users of gas natural by sector 51 • Mexico’s natural gas supply 52 • Mexico’s natural gas demand 53 • Natural gas prices 54 • Gas pipeline infrastructure 55 • Legal framework 56 • Natural gas regulatory framework 57 • Oil: 58 • Oil information 59 • National crude oil export and production 60 • Crude oil reserves 61 • Average monthly price of Mexican Crude oil 62 • Pemex 63 • Mexico’s refineries 65 • Coal: 66 • Coal information 67 • Telecommunications • Telephone lines in service 70 • Telephone density 71 • Cellular phone 72 • Long distance service 73 • Internet users 74 • Telecommunication regulatory summary 75

4. CONTENTS 3. Enron Activities • Enron Energía Industrial de México 79 • Risk management 80 Information sources 81

5. 1. Country Profile

6. Terrain • High, rugged mountains; low coastal plains; high plateaus; desert • Main rivers: Río Bravo, Lerma-Santiago, Grijalva and the Usumacinta Mexico Enron Offices Enron 245 Mw plant Construction begins: 10-00 Commercial operation:07-02 . • Territory area • Square miles • Continental • Islands • Land • Climate • Varies from tropical to desert, depending on altitude. • Average temperature range in Mexico: from 6° to 19 ° C (43° Fto 66 °) in January to 12° to 26 ° C (54° to 79 ° F) in May. • BoundariesMiles • Belize and Guatemala • U.S. • Coastline • 714 • 1,958 • 6,911

7. Demographics Mexico has a population of 97.3 million inhabitants with a density of 19.3 inhabitants per square mile.. The labor force is of 39.7 million people. Economic growth has led to the continuing creation of jobs and a sharp reduction in unemployment rates. During the first 11 months of 1999, the total number of workers registered by the Mexican Social Security Institute increased by more than 870,000, and the open unemployment rate in December fell to its lowest level since 1985. • Population • Million people • Employment • 100% = 39’751,385* (1999) • Unemployment • 2.5% • Total • Other states • State of • Mexico • Mexico • City** • State of • Veracruz • 97.5% • Employment * Economically active population ** Metropolitan Mexico City plus suburbs has more than 20 million inhabitants. Monterrey has 1,108,499 inhabitants.

8. Economics Mexico had a GDP of 409 billion dollars in 1999 (estimate), and the GDP per capita at purchasing power parity was of $4,625 dollars in the same year . In 1999 its GDP had a positive real growth rate of 3.7 %. A GDP growth rate of more than 5% is expected for year 2000. ESTIMATE 100% = 409 billion * Imputed banking services GDP-composition by sectorBillion dollars 1999 Electricity, gas and water • Agriculture • Mining • Manufacturing • Construction • Electricity, gas and water • Commerce, restaurants and hotels • Transport, storage and communications • Finnacial services, insurance, real estate and leasing • Communal, social and personal services • - Imputed banking services * • Total • 24.33 • 5.93 • 87.23 • 17.60 • 6.70 • 85.27 • 42.98 • 64.37 • 85.90 • 11.32 • 409.0 Mining Construction Manufacturing 2% Agriculture 4% 1% 5% 21% Transport, storage and communications 1% 10% 21% 15% Financial services, insurance, real estate and leasing Communal, social and personal services 20% Commerce, restaurants and hotels * Less imputed banking services.

9. Economics In recent years, the Mexican government has implemented a series of economic reforms to strengthen the country's economic fundamentals and increase its ability to cope with external shocks. Because of the progress that has been made, the government is confident that Mexico will be able to leave recent crises behind and start the new millennium with a stable and growing economy. FINANCE AND DEVELOPMENT • The Mexican economy has made important strides since the 1994-95 economic and financial crisis, with economic growth averaging 6 percent in 1996-97, and inflation declining from 52 percent in 1995 to 12.3 percent in 1999. The marked recovery in economic performance was disrupted somewhat in 1998 by unsettled conditions in international capital markets and a decline in world oil prices. However, the effects of the adverse shocks were mitigated by the authorities' prompt action taken to cut government expenditure by 0.7 percentage point of GDP and to tighten monetary policy on several occasions. • Economic performance in 1999 and early 2000 has been good. Annual real GDP growth accelerated from 2.6 percent in the last quarter of 1998 to 5.3 percent in the fourth quarter of 1999; real GDP is estimated to have increased by 3.7 percent for the year as a whole. The recovery in economic activity was initially driven by higher exports and investment, but more recently by a significant rebound in private consumption. The 12-month inflation rate fell to 12.3 percent in December 1999 (less than the official target of 13 percent) and declined further to 10.5 percent in February 2000. It is expected to be less than 10% for 2000. • Notwithstanding a pick-up in imports, the external current account narrowed from 3.8 percent of GDP in 1998 to an estimated 2.9 percent of GDP in 1999 in response to improved terms of trade and increased non-oil exports. Capital inflows increased markedly in the second half of the year, led by foreign direct investment which covered more than 80 percent of the current account deficit, and net international reserves rose by US$3.9 billion to more than 30 billion US dollars. A continued improvement in labor productivity and wage restraint helped Mexico maintain external competitiveness, as indicated by the level of the real effective exchange rate based on relative unit labor costs and the buoyancy in non-oil exports. External debt as a share of GDP declined further in 1999 to 33 percent from 38 percent in 1998.

10. FINANCE AND DEVELOPMENT (CONTINUED) • The government has adopted measures to strengthen the operating environment of the banking system and to facilitate the banking system recovery. The definition of regulatory capital has been significantly tightened and will be phased in through end-2002, coinciding with the lifting of the universal deposit guarantee (and replaced by a limited insurance scheme like the FDIC). In addition, loan-loss provisioning of credit card and mortgage loans has been tightened and the supervisory authorities have made progress in the areas of banks' internal controls, accounting procedures, and disclosure. Important steps have been taken to advance the bank restructuring process with preparations underway for the Bank Savings Protection Institute (IPAB) to liquidate its assets according to a specific timetable and to sell the large banks Serfin and Bancrecer. In addition, the recently-announced merger of Bancomer and Spain’s BBV will include a large capital infusion and create Mexico's largest financial institution. • Another important achievement in recent years has been the reduction in inflation. The consumer price index increased 12.32 percent in 1999, below the 13 percent target established at the beginning of the year down from 52% in 1995. On the external side, non-oil exports have continued to show a positive trend, growing 15.0 percent in 1999. Additionally, the trade balance reflected the increase in international oil prices. In 1999, Mexico's current account deficit amounted to $13.0 billion, or 2.8 percent of GDP, and foreign direct investment reached $10.7 billion, or 76.6 percent of the current account deficit.

11. Economic outlook During 2000, Mexico will continue to take a prudent policy stance in view of the possibility of a slowdown in the U.S. economy. The Mexican government has also taken steps to ensure that it can cope with external shocks. ECONOMIC STRATEGY FOR 2000 • The economic strategy for 2000 has been designed to maintain the positive trends in economic growth and job creation, continue to reduce inflation, increase social spending, and achieve an orderly transition into the next administration. To ensure that these objectives are met, the Mexican government firmly intends to maintain sound public finances and continue the structural reform process. • The government will continue to reaffirm its commitment to maintain fiscal discipline. The budget for 2000 establishes a public deficit of 1 percent of GDP; total budgetary income is expected to surpass 20 percent of GDP, while the public sector's expenditure will, in contrast, remain constant, though still above 20 percent of GDP. • Government expenditure for 2000 will continue to focus on the social agenda, particularly on education, health, social security, and poverty reduction. Expenditures on social programs, as well as on efforts to fight extreme poverty, will significantly increase in real terms. • The government's fiscal policy is consistent with monetary and exchange rate policies. In 2000, the Bank of Mexico (the country's central bank) will maintain its commitment to hold the yearly inflation rate to 10 percent. In addition, Mexico will maintain its floating exchange rate regime, which has allowed an orderly adjustment to external shocks, increased the proportion of long-term capital inflows, reduced the possibilities of speculative attacks, and prevented misalignments of the real exchange rate. Furthermore, the current account deficit is expected to be 3.1 percent of GDP, or $15.4 billion, and will remain within sustainable levels and consistent with the availability of foreign direct investment. In addition, domestic savings are expected to reach close to 21 percent of GDP in 2000.

12. The continued growth momentum, the decline in inflation, and the rise in international reserves have demonstrated the good performance of the Mexican economy in 1999 and early 2000. ECONOMIC STRATEGY FOR 2000 (CONTINUED) • The reforms Mexico has implemented, which have focused on economic and financial liberalization, have enabled the economy to take advantage of the benefits of globalization while minimizing the risks inherent in this process. The reforms—which have included trade and capital account liberalization, increased private sector participation in key sectors of the economy, tax reforms, changes in labor market structure, capital market liberalization, and pension system reforms—have transformed a closed, heavily regulated economy with high government intervention into an open, market-driven economy. • The liberalization of the capital account has played a key role in Mexico's efforts to achieve economic and financial integration with the world economy. The government has eliminated restrictions on capital inflows, abolishing limits on commercial borrowing from abroad, foreign investment in Mexican securities, and foreign participation in domestic money markets. Controls on capital outflows have also been abolished. • The reform of the tax system is an ongoing process. Every year, the government has taken measures to make tax collection more efficient, transparent, and progressive. In this respect still a large effort has to be made. Additionally, the government expects to discuss and implement an integral fiscal reform that will allow Mexico to broaden its tax base, improve tax compliance, and reduce the public sector's dependence on oil-related revenues.

13. Currency The official currency is the Mexican Peso (Mex$) divided into 100 Centavos. In December 1994, Mexico abandoned its exchange band mechanism, which had been in place since 1991, in favor of a free-floating exchange rate. The peso has floated freely since then with only infrequent interventions by the Bank of Mexico (Mexico's central bank). The flexible exchange rate regime has helped Mexico to absorb external shocks in an orderly manner and has shown less volatility than expected. Thus, during 1999, the peso appreciated 3.6 percent with respect to the U.S. dollar. EXCHANGE RATE 1994-2000 • Mexican Pesos per US$1 Note: The exchange rate as of August 10 was of 9.32 Mexican Pesos per U.S. Dollar

14. Government • Federal Multiparty Republic • Based on Napoleonic code; judicial review of legislative acts in Cassation Court only; has not accepted compulsory International Court of Justice jurisdiction • Executive, Legislative and Judicial. The mexican government closely resembles the U.S. structure, with three branches, but with a dominant executive. • President Ernesto ZEDILLO Ponce de Leon (since December 1994), PRI (Institutional Revolutionary Party ); new elected president Vicente FOX Quesada (1 December 2000), PAN (National Action Party ); note—the president is both the chief of state and head of government • Cabinet appointed by the president with consent of the Senate • President elected by popular vote for a six-year term; election last held 2 July 2000 (Next to be held in July 2006). Mexico is on a transition period to the next administration. • Ernesto ZEDILLO Ponce de Leon elected president; percent of vote—Ernesto ZEDILLO (PRI) 50.18%, Cuauhtemoc CARDENAS Solorzano (PRD) 17.08%, Diego FERNANDEZ de Cevallos (PAN) 26.69%, other 6.05% • Vicente FOX Quesada elected president; percent of vote--Vicente FOX (PAN) 42.71%, Francisco LABASTIDA 35.78%, Cuauhtemoc CARDENAS 16.52%, others 4.99% • Government type: • Legal system: • Goverment structure: • Executive branch, • Chief of state and head of government: • Cabinet: • Elections: • Election results 1997: • Election results 2000:

15. Government (CONTINUED) • Legislative branch: • Elections : • Elections results 1997: • Elections results • 2000: • Bicameral National Congress or Congreso de la Union consists of the Senate or Camara de Senadores (128 seats; half are elected by popular vote to serve six-year terms, and half are allocated on the basis of each party's popular vote) and the Chamber of Deputies or Camara de Diputados (500 seats; 300 members are directly elected by popular vote to serve three-year terms; remaining 200 members are allocated on the basis of each party's popular vote, also for three-year terms. There is no immediate reelection for members of Congress • Chamber of Deputies — last held 2 July 2000 (next legislative elections in NA 2003) • Senate—percent of vote by party—NA; seats by party—PRI 77, PAN 33, PRD 16, PVEM 1, PT 1; note—the distribution of seats as of May • 1998 is as follows—PRI 77, PAN 31, PRD 15, PT 1, independents 4; Chamber of Deputies—percent of vote by party—PRI 39%, PAN 27%, PRD 26%; seats by party—PRI 239, PRD 125, PAN 121, PVEM 8, PT 7; note—the distribution of seats as of May 1998 is as follows—PRI 237, PRD 127, PAN 120, PT 7, PVEM 6, independents 3 • Senate—percent of vote by party— PAN 38.33%, PRI 36.33%, PRD 18.75%, PCD 1.41%, PARM 0.74%, DS 1.83%, other 2.62%;seats by party PAN and PVEM 38, PRI 47, PRD and PT 11. And 32 seats are still pending. • Chamber of Deputies (House of representatives)—percent of vote by party—PAN and PVEM (alliance) 38.28%, PRI 36.88%, PRD and PT (alliance) 18.68%, PCD 1.15%, PARM 0.73%, DS 1.88%, other 2.41%; seats by party--- PAN and PVEM 141, PRI 131, PRD and PT 28

16. Government (CONTINUED) • Judicial branch: • Political parties and leaders: • Political pressure groups and leaders: • Supreme Court of Justice or Corte Suprema de Justicia (judges are appointed by the president with consent of the Senate) • Recognized parties—Institutional Revolutionary Party or PRI [Dulce María SAURI Riancho]; National Action Party or PAN [Luis Felipe BRAVO Mena]; Party of the Democratic Revolution or PRD [Amalia GARCIA]; Mexican Green Ecologist Party or PVEM [Jorge GONZALEZ Torres]; Workers Party or PT [NA], Social Democracy or DS [Gilberto RICON Gallardo y Meltis]; Democratic Center Party or PCD [Manuel CAMACHO Solís]; Authentic Mexican Revolution Party or PARM [Carlos GUZMAN Perez]; Convergence for the Democracy or CD [Dante DELGADO]; Nationalist Society Party or SN [Gustavo RIOJAS Santana]; Social Alliance Party or AS [José Antonio CALDERÓN Cardoso]. • Roman Catholic Church; Confederation of Mexican Workers or CTM; Confederation of Industrial Chambers or CONCAMIN; Confederation of National Chambers of Commerce or CONCANACO; National Peasant Confederation or CNC; Revolutionary Workers Party or PRT; Revolutionary Confederation of Workers and Peasants or CROC; Regional Confederation of Mexican Workers or CROM; Confederation of Employers of the Mexican Republic or COPARMEX; National Chamber of Transformation Industries or CANACINTRA; Coordinator for Foreign Trade Business Organizations or COECE; Federation of Unions Providing Goods and Services or FESEBES; National Union of Workers or UNT

17. Vicente Fox´s Biography • He was born in Mexico, City on July 2 of 1942. He studied Business Administration at the Iberoamericana University and received a diploma in International Management at Harvard’s University. He was employed by Coca Cola. He worked there 15 years for first as route supervisor and succesfully climbed up to become the youngest CEO of the Company in Mexico and Latin America.He stayed for five more years. After that, he returned to the family farm in Guanajuato (agriculture and boots manufacturing). • He affiliated to the PAN and was first elected to public office in 1988 as federal representative. 1995 he was elected Governor of the Mexican State of Guanajuato. • On July 2 of 2000, Vicente Fox won the presidential elections. On August 2, he was officially declared President elect. He will take office on December 1.

18. The recent alternation of power among the traditional governing party and the two major opposition parties in the lower house of Congress and in State governorships has injected new transparency and accountability into the political mix. If the economy maintains growth past the transition to the new administration, there is a good chance that Mexico will have broken the cycle of boom and bust tied to the six year presidential cycle. Political situation • México has enjoyed political stability for most of this century and is now living an important historical moment. After 71 years, the Institutional Revolutionary Party (PRI) lost its first presidential election since its founding in 1929, and for the first time the center-right National Action Party (PAN) won the presidential elections, on July 2, 2000. Most national and international observers regarded the July 2000 presidential elections as the most free and fair in Mexican history and have praised the country’s electoral institutions and regulation. • The Mexican authorities announced on July 10 a “Financial Strengthening Program 2000-2001” with the aim of ensuring an orderly economic transition for the new administration. These actions to ensure a smooth transition send positive signals to the international community by underscoring the continuing development of democratic institutions in Mexico. • Before the July elections, the key parties in the opposition lay to either side of the PRI in the political spectrum. The center-right (They like to be considered center left) National Action Party (PAN) advocates private sector-oriented policies, and more honesty in government. As of June 1998, it held six state governorships -- before 1989, governors were always PRI members-- and it has many more officeholders at lower levels of government. The leftist Party of the Democratic Revolution (PRD) espouses a populist outlook and believes in more government intervention in the economy. Its standard bearer, Cuauhtemoc Cardenas, in July 1997 won the first election for the chief executive of the Federal District (the mayor of Mexico City) in more than 70 years. Prior to Cardenas' victory, the President of Mexico had appointed the mayors of Mexico City. • The Federal Congress has increased its autonomy from the executive branch, especially in the Chamber of Deputies after the PRI lost its absolute majority in the July, 1997 elections.

19. Political situation (CONTINUED) • In 1989-90, the Congress passed reform legislation that revamped the entire federal electoral system, creating an autonomous Federal Electoral Institute and a separate Federal Electoral Tribunal to adjudicate election disputes. • Nonpartisan counselors run the Federal Electoral Institute (IFE). The recent reforms also have strengthened the role of the judicial system in protecting civil rights in voting matters. Mexicans observe the electoral process from start to finish with specific legal authority to report irregularities and foreign "visitors" also witness Mexican elections. The IFE provides support to state and local electoral authorities. • The new administration will face many challenges, ranging from strengthen Mexico’s ability to deal with volatility in international financial markets to the aftermath of the conflict in Chiapas. Although there has not been fighting in Chiapas between government and guerrilla forces ( the Zapatistas or EZLN) since 1994. Now the new elected president, Vicente Fox is working on starting peace negotiations again with EZNL.

20. Mexico has started the year 2000 in a better position within the international arena, owing to eight bilateral trade agreements and the access that they provide to the most important markets in the world. The country's aggressive market opening through bilateral and multilateral trade agreements has continued to create new markets for Mexican products, while allowing more foreign competition Investment climate • Mexico has started the year 2000 in a better position within the international arena, owing to eight bilateral trade agreements (U.S.- Canada, Bolivia, Chile, Costa Rica, Venezuela-Colombia, Nicaragua, Guatemala, El Salvador, Honduras, Israel and Europe) and the access that they provide to the most important markets in the world: North America and, more recently, the European Union. Mexican foreign policy is geared toward strengthening its participation in the trade liberalization process, particularly with the members of Asia-Pacific Economic Cooperation and with six additional countries of Central and South America. Mexico signed the North American Free Trade Agreement (NAFTA) in 1994, and recently signed an agreement with Central America countries (North Triangle). Mexico is also member of the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO). • Mexico has reduced significantly regulation of the Mexican economy over the past decade. The • government introduced legislation in 1993 to promote greater competition, limit monopolistic • behavior, and prohibit practices that restrain trade. A 1993 Foreign Trade Law eliminated most nontariff trade restrictions and established remedies for unfair trade practices, such as export subsidies and dumping • Conversion and transfer policies Mexico's economy is open in this regard, due to the requirements of its membership in the NAFTA and its accession to the OECD. In general, capital and investment transactions, remittance of profits, dividends, royalties, technical service fees, and travel expenses are handled at the market-determined exchange rate. • Mexico’s economic recession contributed to a substantial increase in street crime, and has raised concerns for the safety of visitors, expatriates and, indeed, Mexican nationals; this generally has not affected the overall investment climate.

21. Investment climate (CONTINUED) • Most foreign investors operate in Mexico through corporations (Sociedades Anonimas de Capital Variable). Foreign-owned corporations are subject to the same laws as local companies and any special regulations governing foreign investment. A Mexican corporation must have at least two shareholders and, except in certain sensitive sectors, can usually be established within 1 - 2 months. Costs of incorporation vary depending on the structure of the company but the average cost is USD 6,000. • Upon registration with the Ministry of Foreign Relations (SRE), Mexican companies with foreign participation will be allowed to own land in restricted border (within 100 kilometers) and coastline (within 50 kilometers) areas for non-residential purposes. However, foreigners may acquire the effective use of residential property in the restricted zones via a trust through a Mexican bank. At this time, only Mexican nationals may own gasoline stations, whose gasoline is supplied by PEMEX, the state-owned petroleum monopoly. Both foreigners and Mexican citizens themselves encounter problems with enforcement of property rights. • The National Foreign Investment Commission decides questions of foreign investment in Mexico. The country's Constitution and the Foreign Investment Law of 1992 reserve certain sectors to the state, such as oil and gas extraction and the generation, transmission, distribution and marketing of electrical power for public service, and a range of activities to Mexican nationals (for example, forestry exploitation, domestic air and maritime transportation.) Barriers to investment

22. Investment barriers (CONTINUED) • Despite remaining restrictions, the Foreign Investment Law greatly liberalized foreign investment, eliminating the requirement for government approval in around 95 percent of foreign investments. The constitution was amended in 1995 to allow foreign investment in railroads, telecommunications and satellite transmission. An initiative to privatize the country's secondary petrochemical complexes did not succeed because it would have limited foreign investors to only 49 percent ownership of existing facilities. Newly built petrochemical plants may have up to 100 percent foreign investment. • Provisions contained in NAFTA opened Mexico to greater U.S. and Canadian investment by • assuring U.S. and Canadian companies' national treatment, the right to international arbitration and the right to transfer funds without restrictions. NAFTA also eliminated some barriers to investment in Mexico such as trade balancing and domestic content requirements. These barriers are also being phased out in some sectors, such as automobile manufacturing. Mexico additionally has implemented its commitment under NAFTA to allow the private ownership and operation of electric generating plants for self-generation, co-generation, and independent power production. In 1995, Mexico issued regulations for the first time allowing private sector participation in the transportation, distribution and storage of natural gas. Contracts let in 1997 and 1998 under the new regulations constitute one of the major success stories in Mexico's ongoing infrastructure development. In 1999, Mexico eliminated a four percent tariff on imports of natural gas, further liberalizing the sector. • The main restriction in the telecommunications sector is a limitation on foreign investment in telephone and value-added services to a 49 percent equity position. However, in cellular telephony, foreign investors may participate up to 100 percent, subject to approval by the National Foreign Investment Commission. Nevertheless, foreign investors may only • participate through a Mexican corporation.

23. Investment barriers (CONTINUED) • Mexico modified its constitution in 1995 to allow for private participation and equity in Mexican telecommunication satellites, including ownership of transponders. The government's satellite firm was privatized in early 1998. Foreign investment is limited to a 49 percent equity position. Loral Space and Communications has a 49% interest in SATMEX, which owns 5 satellites including SATMEX V (to be used by EBS to cover the Americas ). • The Telmex legal monopoly on long distance and international telephone service ended in August 1996 and competition was introduced in January 1997. There currently is competition in all major cities and much of the rest of Mexico. Eight firms are currently authorized to provide long distance service, five of which have U.S. partners. USTR cited Mexico in its March 1998 annual "1377" review for failure to meet its WTO Basic Telecom Agreement commitments, including a discriminatory 58 percent surcharge on inbound international long distance traffic and failure to allow International Simple Resale (ISR). In December 1998, the government eliminated the 58 percent surcharge, but has yet to permit ISR. Local, basic telephone service is already technically open to competition, but practical competition in this area has not yet been fully developed. • The financial services sector is generally open and liberalized. Mexico continued during 1995 to promote competition and diversification in the financial sector by encouraging foreign investment.

24. Degrees of foreign ownership allowed in restricted sectors of the economy • Sectors reserved for the state • Petroleum and other hydrocarbons (participation is allowed in the transportation, storage, distribution and marketing of natural gas) • Basic petrochemicals • Telegraphic and radio telegraphic services • Radioactive materials • Electricity (limited participation in generation is allowed) • Nuclear energy • Coinage and printing of money • Mail • Control, inspection and surveillance of maritime ports, inland ports and heliports • Sectors reserved for mexican nationals • Retail sales of gasoline and liquid petroleum gas • No-cable radio and television services • Credit unions, savings and loan institutions and development banks • Certain professional and technical services • In certain other sectors, foreign investment may be limited to a minority position, which is the case in telecommunications.

25. Privatization status • The government has privatized or closed more than 1000 parastatal companies since 1986. State enterprises thus far privatized include commercial banks, the telephone company, a television network, airlines, steel production, railroads and ports, warehouses, and several major industrial facilities. President Zedillo continued the privatization trend. • In 1997 and 1998, multiple contracts were entered for private sector construction of power plants and for distribution of natural gas to strategically chosen communities. A proposed Constitutional amendment that would allow more private sector participation in the generation and distribution of electricity, has lingered in Congress. • The government announced plans to sell up to 49 percent of its secondary petrochemical plants, despite opposition party resistance. • Airport privatization which started in mid November 1999, continues. Mexico's airports have been divided into five geographic areas. Each area will be managed by a group of investors. While some airport groups are fully operational, Pacific and SouthEast for example, the privatization process for the remaining groups should near completion toward the end of 2000. The Mexican government will maintain control of a limited number of smaller airports in the interest of the public served by these regional facilities.

26. 2. Energy Profile

27. Electricity

28. The electric industry The average annual growth of 5%* in the electric energy demand from 1989 to 1999 has surpassed every forecast, thus the electric system operates beyond its capacity. Currently, the operational reserve fluctuates between 5.6 and 2.0% when the minimum should be at 6%. Generation installed capacity 100%= 35,675 MW (1999) Supply • Installed capacity by type of plant (99E) • Thermo • Hydro • Coal • Nuclear • Geothermal • Wind • Total • Expected avg. ann. Growth 97-08 • Peak Load • Exports • Losses • Demand • Electricity consumption • Electricity consumed per capita: • Customer base • Total users • Average rates • Residential : • Commercial: • Industrial: 21,351.1 MW 9,662.8 MW 2,600 MW 1,309.1 MW 749.9 MW 2.2 MW 35,675.1 MW 6.1% 28,751 MW .031TWh 12.85% (weighted average CFE and LFC) Hydroelectric 14% Nuclear 5% Geothermal and Wind 3% Coal 11% 67% Hydrocarbons 135 TWh 1400 kwh/inhab. Coverage above 95% 21.5 million 0.058 ¢/kWh 0.1354 ¢/kWh 0.0531 ¢/kWh National Electric Grid • Transmission lines: 21,786 miles • Subtransmission lines: 26,262 miles • Distribution lines: 341,850 miles

29. BASIC INDICATORS OF THE NATIONAL ELECTRIC SECTOR 1996 1997 1998 Indicators CFE LFC CFE LFC CFE LFC 871 1,918 24,057 3,458 23,314 14.87 33,944 159,831 146,474 32,938 539,301 10.63 871 1,554 25,461 3,475 23,883 15.78 33,956 168,981 110,710 33,521 550,677 10.72* 871 2,001 26,499 ND ND 21.87 • Generation installed capacity (MW) • Gross generation (GWh) • Energy Sales (GWh) • Transmission lines (km) • Distribution lines (km) • Energy losses (%) 33,920 149,970 137,467 32,198 519,879 11.09 Source: CFE board

30. Industry participation Open to limited private participation Reserved to the state Generation Transmission Distribution • The law grants four different permits for private parties to generate electric energy: • a)Self-supply (satisfaction of the needs of a group of partners) • b)Co-generation • c)Small production (not exceeding 1 to 30 MW) • d)Independent production (30 MW destined exclusively for export, or for its sale to the CFE or LFC) • Cogeneration and self supply: • Permit granted by the CRE • Independent production for sale to CFE (public service): • CFE, IPP bidding process) • In every case, the energy produced must be destined either for self-supply, for export, of for sale exclusively to the CFE. If spare energy is produced in the self-consumption schemes, it must be made available to the CFE. Private parties are also allowed to import electricity for their own consumption • Transmission, distribution and marketing of electric energy are still considered to be under state control and are not subject to concession. They are performed by the CFE and the LFC. The CFE operates in the major area of the country, whereas the LFC is responsible only for the Federal District and the following states: Mexico, Morelos, Hidalgo and Puebla. The CFE is the actual operator of the interconnected system, which renders LFC as a mere distribution facility.

31. INDUSTRY PARTICIPATION • Generators in • operation: • Major transmission • Distribution companies • Regulatory entity • International interconnections • The Federal Electricity Commission (CFE) • The Center Light and Power Company (LFC) • Mexican Petroleous (PEMEX) • GE / Bechtel / ICA-Fluor Daniel / EPNG- Consurtium - BLT • Nichimen / AES / Hermes - IPP • The Federal Electricity Commission (CFE) • The Federal Electricity Commission (CFE) • The Central Light and Power Company (LFC) • The Energy Regulatory Commission (CRE) • USA 230 Kv • Belize 115 Kv

32. MAIN GENERATION CENTERS - 1998 • Hydroelectric • Conventional Thermo • Coal • Nuclear • Geothermal • Combined cycle • Dual • 33 • 40 • 28 • 44 • 30 • 10 • 31 • 38 • 27 • 39 • 54 • 14 • 12 • 29 • 48 • 36 • 59 • 42 • 26 • 25 • 11 • 45 • 32 • 50 • 23 • 22 • 13 • 24 • 49 • 15 • 47 • 60 • 21 • 57 • 37 • 35 • 9 • 62 • 16 • 18 • 19 • 63 • 41 • 17 • 53 • 20 • 52 • 55 • 34 • 7 • 61 • 58 • 8 • 46 • 51 • 56 • 5 • 4 • 43 • 6 • 3 • 2 • 1 Note: During the first semester of 1999, the gas turbines Rosario 7, Río Bravo and Huinalá entered into operation

33. Genera- tion • GWh • Plant factor • % • Number of units • Capacity • MW • Name of the center • No. • Municipality • State • Type • Area GROSS ENERGY GENERATED IN 1998 BY THE MAIN OPPERATING CENTERS • A. López M. (Tuxpan) • Fco. Pérez R. (Tula) • Pte. P. Elías C. (Petacalco) • Laguna Verde • Río Escondido • Coal II • M. Alvarez M (Manzanillo) • Salamanca • Altamira • Manzanillo II • Cerro Prieto • M. Moreno T. (Chocoasén) • Valle de México • Villa de Reyes • Puerto Libertad • J. Aceves P. (MazatlánIII) • Infiernillo • Monterrey • C. Rodríguez R. (Guaymas II) • Dos Bocas • Malpaso • Huinalá • Francisco Villa • E. Portes G. (Río Bravo) • Guadalupe Victoria (Lerdo) • Presidente Juárez • Samalayuca • B. Domínguez (Angostura) • J. de Dios Bátiz (Topolobampo II) • Temascal • Samalayuca II • Peñitas • Gómez Palacio • F. Carillo Puerto • 24 • 17 • 43 • 41 • 38 • 39 • 20 • 21 • 23 • 20 • 40 • 2 • 18 • 22 • 30 • 32 • 7 • 25 • 31 • 46 • 3 • 45 • 27 • 26 • 29 • 33 • 28 • 1 • 36 • 5 • 44 • 4 • 48 • 37 • Tuxpan • Tula • La Unión • Alto Lucero • Río Escondido • Nava • Manzanillo • Salamanca • Altamira • Manzanillo • Mexicali • Chicoasén • Acolman • Villa de Reyes • Pitiquito • Mazatlán • La Unión • S. N. Garza • Guaymas • Medellín • Tecpatan • Pesqueira • Delicias • Río Bravo • Lerdo • Rosarito • Cd. Juárez • Alcalá • Ahome • San Miguel • Cd. Juárez • Ostuacán • Gómez Palacio • Valladolid • Veracruz • Hidalgo • Guerrero • Veracruz • Coahuila • Coahuila • Colima • Guanajuato • Tamaulipas • Colima • Baja California • Chiapas • Mexico • San Luis Potosí • Sonora • Sinaloa • Guerrero • Nuevo León • Sonora • Veracruz • Chiapas • Nuevo León • Chihuahua • Tamaulipas • Durango • Baja California • Chihuahua • Chiapas • Sinaloa • Oaxaca • Chihuahua • Chiapas • Durango • Yucatán • Steam • Steam/CC • Dual • Nuclear • Coal • Coal • Steam • Steam • Steam • Steam • Geothermal • Hydroelectric • Steam • Steam • Steam • Steam • Hydroelectric • Steam • Steam • Combined cycle • Hydroelectric • Combined cycle • Steam • Steam • Steam • Steam • Steam • Hydroelectric • Steam • Hydroelectric • Combined cycle • Hydroelectric • Combined cycle • Steam/CC • Oriental • Central • Occidental • Oriental • Northeast • Northeast • Occidental • Occidental • Northeast • Occidental • Baja California • Oriental • Central • Occidental • Northwest • Northwest • Central • Northeast • Northwest • Oriental • Oriental • Northeast • North • Baja California • North • Oriental • Northwest • Oriental • Northwest • Oriental • North • Oriental • North • Peninsular • 6 • 11 • 6 • 2 • 4 • 4 • 4 • 4 • 4 • 2 • 9 • 5 • 7 • 2 • 4 • 3 • 6 • 6 • 4 • 6 • 6 • 5 • 5 • 3 • 2 • 8 • 2 • 5 • 4 • 6 • 6 • 4 • 3 • 5 • 2,100 • 1,982 • 2,100 • 1,309 • 1,200 • 1,400 • 1,200 • 866 • 800 • 700 • 620 • 1,500 • 838 • 700 • 632 • 616 • 1,000 • 465 • 484 • 452 • 1,080 • 378 • 399 • 375 • 320 • 680 • 316 • 900 • 360 • 354 • 522 • 420 • 200 • 287 • 14,371 • 13,597 • 12,692 • 9,265 • 9,027 • 8,929 • 7,639 • 5,360 • 4,998 • 4,886 • 4,845 • 4,562 • 4,380 • 3,845 • 3,561 • 3,258 • 2,873 • 2,842 • 2,714 • 2,618 • 2,606 • 2,583 • 2,456 • 2,221 • 2,158 • 2,044 • 1,981 • 1,886 • 1,831 • 1,517 • 1,495 • 1,298 • 1,252 • 1,185 • 78.1 • 78.3 • 69.0 • 80.8 • 85.9 • 72.8 • 72.7 • 70.7 • 71.3 • 79.7 • 89.2 • 34.7 • 59.7 • 62.7 • 64.3 • 60.4 • 32.8 • 69.8 • 64.0 • 66.1 • 27.5 • 78.0 • 70.3 • 67.6 • 77.0 • 34.3 • 71.6 • 23.9 • 58.1 • 48.9 • 32.7 • 35.3 • 71.5 • 47.1

34. Genera- • tion • GWh • Plant factor • % • Number of units • Capacity • MW • Name of the center • No. • Municipality • State • Type • Area GROSS ENERGY GENERATED IN 1998 BY THE MAIN OPPERATING CENTERS (CONTINUED) • Mérida II • Fdo. Hiriart Balderrama • C. Ramírez U. (Caracol) • El Sauz • J. Ma. Morelos (Villita) • Jorge Luque • Lerma (Campeche) • Aguamilpa • Punta Prieta • Mazatepec • L. Donaldo Colosio (Huites) • Azufres • Poza Rica • Pdte. P. Elias C. (El Novillo) • Cupatitzio • Necaxa • Húmeros • Nachi-Cocom II • 27 de septiembre (El Fuerte) • Bacurato • Agua Prieta • Agustín Olachea (San Carlos) • Cobano • M. M. Dieguez (Sta. Rosa) • Tepexic • Prof. R.J. Marsal (comedero) • Humaya • Lerma (Tepuxtepec) • Patla • Tingambato • 35 • 16 • 6 • 47 • 8 • 19 • 34 • 13 • 50 • 52 • 14 • 51 • 49 • 10 • 53 • 9 • 58 • 55 • 54 • 12 • 15 • 42 • 57 • 62 • 60 • 11 • 59 • 61 • 63 • 56 • Mérida • Zimapán • Apaxtla • P. Escobedo • L. Cárdenas • Tultitlán • Campeche • Tepic • La Paz • Tlatlauquitepec • Choix • Cd. Hidalgo • Tihuatlán • Soyopa • Uruapan • J. Galindo • Chignautla • Mérida • El Fuerte • Sinaloa de Leyva • Zapopan • San Carlos • G. Zamora • Amatitlán • T. del Río • Cosala • Badiraguato • Contepec • Zihuateutla • Otzoloapan • Yucatán • Hidalgo • Guerrero • Querétaro • Michoacán • México • Campeche • Nayarit • B. California Sur • Puebla • Sinaloa • Michoacán • Veracruz • Sonora • Michoacán • Puebla • Puebla • YuBLTán • Sinaloa • Sinaloa • Jalisco • B. California Sur • Michoacán • Jalisco • Puebla • Sinaloa • Sinaloa • Michoacán • Puebla • México • Steam • Hydroelectric • Hydroelectric • Combined cycle • Hydroelectric • Steam • Steam • Hydroelectric • Steam • Hydroelectric • Hydroelectric • Geothermal • Steam • Hydroelectric • Hydroelectric • Hydroelectric • Geothermal • Steam • Hydroelectric • Hydroelectric • Hydroelectric • Int. Combustion. • Hydroelectric • Hydroelectric • Hydroelectric • Hydroelectric • Hydroelectric • Hydroelectric • Hydroelectric Hydroelectric • Peninsular • Occidental • Oriental • Occidental • Central • Central • Peninsular • Occidental • Baja California • Oriental • Northwest • Occidental • Oriental • Northwest • Occidental • Central • Oriental • Peninsular • Northwest • Northwest • Occidental • Baja California • Occidental • Occidental • Central • Northwest • Northwest • Central • Central • Central • 3 • 2 • 3 • 4 • 4 • 8 • 4 • 3 • 3 • 4 • 2 • 12 • 3 • 3 • 2 • 10 • 7 • 3 • 3 • 2 • 2 • 2 • 2 • 2 • 3 • 2 • 2 • 3 • 3 • 3 • 272 • 198 • 292 • 600 • 218 • 295 • 362 • 150 • 960 • 113 • 220 • 422 • 88 • 117 • 135 • 72 • 109 • 42 • 79 • 59 • 92 • 240 • 65 • 52 • 61 • 44 • 100 • 90 • 60 • 37 • 135 • 33,062 • 1,174 • 1,134 • 1,112 • 1,112 • 1,089 • 1,031 • 956 • 777 • 686 • 623 • 503 • 455 • 441 • 439 • 404 • 387 • 356 • 335 • 246 • 225 • 225 • 209 • 203 • 196 • 186 • 178 • 157 • 157 • 107 • 62 • 167,942 • 67.7 • 44.3 • 21.2 • 58.2 • 42.1 • 32.5 • 72.7 • 9.2 • 69.3 • 32.3 • 13.6 • 59.1 • 43.0 • 37.1 • 64.1 • 40.6 • 96.6 • 48.4 • 47.5 • 27.9 • 10.7 • 36.8 • 44.5 • 36.7 • 48.2 • 20.3 • 20.0 • 29.9 • 32.9 • 5.2 • 57.9 Nota: C: Fuel Oil; D: Diesel; UO2: Uranium Oxide; G: Gas; K: Coal; CC: Combined Cycle

35. 176.78 161.38 151.88 142.03 139.11 GROSS CFE’S ELECTRIC ENERGY GENERATION Thousand Gigawatt hours Source: CRE with CFE’s data

36. Installed power • Yearly increase YEARLY EVOLUTION OF CAPACITY INSTALLED BY CFE Thousands of Megawatts % % % % % % % % % % % Source: CRE with CFE’s data

37. Capacity will have to be increased almost 60% within the next 9 years, to be able to satisfy the demand, asuming a GNP yearly growth of between 4 and 5%. FUTURE EXPANSION OF ELECTRIC INFRASTRUCTURE – OFFICIAL SCENARIO Megawatts 1999-2008 22,248 55,773 15,385 (1,731) Factors which impact the increase of the demand 20,517 6,444 35,675 • The country’s economic growth by 1999 was of 3.7% in terms of GNP • The population growth rate in Mexico is approximately 1.6%/yr • 5% of the population still lacks the service of electric energy Capacity by December 1999 Capacity under construc- tion Required additional capacity Total additional capacity Capacity to be removed Total capacity by 2008 Increase in total capacity

38. ENGAGED PROJECTS IN CONSTRUCTION PROCESS (1999-2008) • Geothermal • Combined Cycle • Diesel-like internal combustion • Turbo gas • Total • 118.7 • 5,813.9 • 51.3 • 459.9 • 6,444.0 • Rosarito 8 y 9 559 MW • Rosarito 10 y 11,450 MW • Cerro Prieto IV • 107.8 MW • Naco Nogales • 225 MW • Rosarito 7TG 164.7 MW • Hermosillo • 258.3 MW • Guerrero Negro • 10.7 MW • Chihuahua II • 417.8 MW • Monterrey II 490.0 MW • Monterrey III 450.0 MW • Río Bravo II • 511.4 MW • Río Bravo TG 154.2 MW • Tres Virgenes • 10.9 MW • Saltillo 255.7 MW • San Carlos • 40.6 MW • Altamira II • 450 MW • Huinalá TG • 511.4 MW • Mérida III • 499 MW • Tuxpan II • 511.4 MW • Bajío (El Sauz) II • 511.4 MW • Campeche • 255 MW Note: During the first semester of 1999, the gas turbines Rosario 7, Río Bravo y Huinalá, entered into operation

39. ENGAGED PROJECTS IN PROCESS OF CONSTRUCTION (1999-2008)* • Contest date • Bidding modality • Proyect • Location • Type • 1999 • 2000 • 2001 • 2002 • 2003 • Proyectos en proceso de construcción • Mérida III (unidades 1 y 2) • San Carlos • Monterrey II • Cerro Prieto IV • Chihuahua II • Guerrero Negro 3 unidades** • Río Bravo II • Hermosillo • Saltillo • Tuxpan II • Rosarito III (unidades 8 y 9) • Bajío (El Sauz) • Tres Vírgenes • Monterrey III • Altamira II • Proyectos con licitaciones en curso • Naco-Nogales • Campeche • Rosarito IV (unidades 10 y 11) • Plan de acción inmediata • Rosarito 7 • Río Bravo • Huinalá • Total • Mérida • Baja California Sur • Nuevo León • Baja California • Chihuahua • Baja California Sur • Tamaulipas • Sonora • Coahuila • Veracruz • Baja California • Guanajuato • Baja California Sur • Nuevo León • Tamaulipas • Sonora • Tabasco • Baja California • Baja California • Tamaulipas • Nuevo León • CC • CITD • CC • GEO • CC • CITD • CC • CC • CC • CC • CC • CC • GEO • CC • CC • CC • CC • CC • TG • TG • TG • 1996 • 1997 • 1996 • 1996 • 1996 • 1997 • 1998 • 1998 • 1998 • 1998 • 1996 • 1998 • 1997 • 1998 • 1998 • 1998 • 1998 • 1998 • 1997 • 1997 • 1997 • EEP • BLT • BLT • BLT • BLT • BLT • EEP • EEP • EEP • EEP • BLT • EEP • BLT • EEP • EEP • EEP • EEP • EEP • OR • OR • OR • 164.7 • 154.2 • 141.0 • 459.9 • 499.0 • 40.6 • 489.9 • 107.8 • 1,137.3 • 417.8 • 10.7 • 511.4 • 258.3 • 255.7 • 511.4 • 559.0 • 511.4 • 3,035.7 • 10.9 • 450.0 • 450.0 • 225.0 • 225.0 • 1,360.9 • 450.0 • 450.0 • 6,443.8 • Total in the system * The values of the capacity of the centers, may slightly change according to the capacity guaranteed by constructors. The effective capacities will be obtained after tests and entry into operation of the projects ** The negotiation of this project was cancelled, therefore, a new convoBLTion for its bid will be published in a future date Note: CC: Combined Cycle; TG: Turbo gas; GEO: Geothermal; CITD: Diesel-like internal combustion; BLT: Projects with the scheme Build Lease Transfer; OR: Electric Sector’s own resources; EEP: External Energy Producer (IPP XXX)

40. AREAS OF THE NATIONAL ELECTRIC SYSTEM The “Interconnected System” (SI) is constituted by two grids. The main interconnected grid covers almost all the territory, and a small grid exclusive for the states of Baja California and Southern Baja California, which is not connected to the main system for economic and technical reasons. • 8 • 1 • 3 • 9 • 4 • 7 • 1 Northwest • 2 North • 3 Northeast • 4 West • 5 Central • 6 East • 7 Peninsular • 8 Baja California • 9 Southern Baja California • 5 • 6

41. INTERCONNECTED NATIONAL POWER GRID 400 kv 11,334 kms. 230 kv 18,874 kms. 115 kv 29,853 kms. 13.8 kv 259,271 kms. Transmission bottlenecks Source: CFE Note: In Mexico City, Morelos , State of Mexico, Puebla and Hidalgo, LFC’s grid is not included

42. LENGTH OF THE TRANSMISSION LINES OF THE NATIONAL ELECTRIC SECTOR Available lines (km)* Year Total Transmission Sub-transmission Distribution 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 489,887.0 509,544.0 524,886.0 540,500.0 553,757.2 564,599.6 579,042.0 599,727.4 615,486.2 627,346.5 27,433.0 28,343.0 28,794.0 29,617.0 30,412.0 30,791.0 31,495.3 32,183.3 33,442.3 35,054.3 36,616.0 38,430.0 38,542.0 38,568.0 39,021.6 39,469.5 39,655.5 40,124.1 41,540.9 42,256.2 423,838.0 442,771.0 457,550.0 472,315.0 484,323.6 494,339.1 507,891.2 527,420.0 540,503.0 550,036.0 * Does not include distribution grids Source: Ministry of Energy, with the information provided by CFE for Government Brief

43. OPERATIONAL EFFICIENCY OF THE NATIONAL ELECTRIC SECTOR Percentage 1999 Indicators Thermal plantsavailability Hydroelectric plants availability Base thermal efficiency Operative Losses CFE 84.00 86.00 35.00 10.70 LFC 52.00 72.00 26.00 21.87 Source: Ministry of Energy

44. The rapid electricity demand growth and serious under investment in the power sector have resulted in a serious decline in operational capacity reserves and the urgent need for further investment. ELECTRIC PRIVATIZATION STATUS In 1999 President Ernesto Zedillo sent an initiative to Congress for the restructuring of the Electric Industry. This initiative, which proposed the sale of assets was heavily opposed by unions and left wing parties. Furthermore, it never came to be discussed in Congress due to the fact that other initiatives and discussions polarized the main parties which roughly held around 30%+ of the seats each. The initiative requires a Constitutional amendment which has to be passed with a qualified majority of at least 66.6 % of the votes. Needless to say, the initiative had no chance in an election year since the energy sector is considered a symbol of sovereignty for the Mexican State. Among other things, the first draft of the regulation included the unbundling of the industry. The ISO and the PX would be together and the pool market would be mandatory. The initiative has evolved. In the second draft, the PX and the ISO would be separated and trading through the pool market would not be mandatory. The sale and or concession of existing assets is still proposed. This last point is what is causing all of the opposition to the reform. Furthermore, another alternative is being proposed in which the second draft is taken into account except for the sale or concession of assets part. This alternative considers unbundling and corporatizing the incumbent monopoly and setting up regional generation and distribution companies. This regional companies would remain under the control of the State but would operate as private companies under private law. It is expected that the reorganization of the Electric Industry will be discussed in Congress towards November or December of 2000.

45. REGULATORY SUMMARY • The regulation of the electricity industry is the responsibility of the Executive Branch through the Ministry of Energy (ME). The Energy Regulation Commission (CRE), ascribed to the ME, will promote the efficient development of four regulated activities: (i) supply and sale of electricity to users; (ii) acquisition of electricity used in public service; (iii) generation, imports and exports by private parties; (iv) transmission services between entities that provide electric public service and holders of permits for electricity generation, export and import. It has technical and operative autonomy. • On 02/27/92, a reform to the Law of the Public Service of Electric Energy (LPSEE) was published in the Official Gazette. It specifies the scope of the activities that can be carried out by private parties. Only the generation phase is open to private investment. Transmission, distribution and commercialization of energy are still considered as a public service and a question of public order, to be carried out exclusively by two governmental entities: CFE and LFC. • Major Laws • The Law of Public Service of Electric Energy (LSPEE) • Regulation of the Law of Public Service of Electric Energy • Regulation of the Public Service of Electric Energy Regarding Contributions • Law of the Energy Regulation Commission (LCRE) • Major Regulatory Entities • The Federal Electricity Commission (CFE) (system operation) • The Energy Regulation Commission (CRE) • Other Laws that have a direct effect on electric utilities • Organic Law of Federal Public Administration. This law regulates the qualifications for electric service in Mexico and appoints, in its article 33, paragraph II, the ME, as the entity in charge of the planning and control of generation, transmission, distribution and supply of electric energy for public service. • The Foreign Investment Law establishes that private parties may participate in the electric sector up to 100%. However, a participation higher than 49% requires the approval of the National Commission on Foreign Investment. • Federal Law of Administrative Procedure. This law establishes the procedure for the appeal of administrative decisions taken by the ME and the CRE.

46. PRODUCTIVITY AND EFFICIENCY IN THE NATIONAL ELECTRIC SECTOR* CFE LFC Sold energy per operational worker (GWh/worker) Sold energy per operation worker (GWh/worker) Interruption time Interruption time (min/user) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 536 495 375 447 251 242 203 236 224.8 196.8 1.295 1.319 1.355 1.447 1.585 1.654 1.771 1.853 1.933 2.020 373 414 437 408 373 401 377 352 374 309 0.821 0.828 0.862 0.906 1.152 1.140 1.165 1.382 1.630 1.700 * The series starts on the year it is recorded Source: Ministry of Energy, with the information provided by CFE and LFC for Government Brief

47. 1999 Management indicators Units CFE LFC • Users per operation worker • Sales per operation worker • Installed capacity per generation worker • Transmission lines per transmission worker • Users per distribution worker users/worker Mwh/worker Mw/worker km/worker user/worker 294 2.02 2 47 491 NA 1.7 2 18 386 LABOR PRODUCTIVITY IN THE NATIONAL ELECTRIC SECTOR

48. Natural Gas

49. Gas NATURAL GAS INFORMATION • Most of natural gas is currently found and produced in association with crude oil. Approximately 75% of the country's gas production is associated and the other 25% is non associated gas. • Associated gas is produced both onshore (primarily in the southern Chiapas and Tabasco regions) and offshore.Natural gas is also produced in the northeastern part of Mexico at the country’s largest non-associated (“dry”) gas field (Burgos), where Pemex has begun an ambitious plan to increase production. • Mexico produced about 4.9 million cubic feet per day of natural gas in 1999. • In 1999, 4.9 million cubic feet were consumed in Mexico • Mexico’s proven reserves amount to 62.2 million cubic feet. • Domestic national: $4.73 US/MMBtu • Industry: $4.73 US/MMBtu • Production • About 61.2 % of total reserves are located in the north of the country, and 22.3 % in the south. The rest are situated in the marine zones. • Mexico accounts for approximately 1.3% of world proven reserves ** and ranks 14th in world natural gas reserves. • Consumption • Reserves • Rates * Despite production and consumption equilibrium Mexico has to import natural gas due to losses and logistic reasons. ** Canada 1.3 %, United States 3.3% (EIA)

50. NATURAL GAS PRODUCTION AND DOMESTIC SALESMillions of cubic feet per day Production Domestic sales* * Pemex own consumption not included ** Preliminary data