Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government)

Transcription

1 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Financial Statements for the Years Ended December 31, 2006 and 2005, and Independent Auditors Report Dated March 12, 2007

2 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Independent Auditors Report and Financial Statements 2006 and 2005 Table of contents Page Independent Auditors Report 1 Balance Sheets 3 Statements of Operations 4 Statements of Changes in Equity 5 Statements of Changes in Financial Position 6 Notes to Financial Statements 8

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5 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Balance Sheets As of December 31, 2006 and 2005 (In thousands of Mexican pesos of purchasing power of December 31, 2006) Assets Current assets: Cash and cash equivalents (Note 4) $ 18,137,476 $ 11,908,291 Accounts and notes receivable: Consumers and other debtors - net (Note 5) 36,794,319 32,142,603 Luz y Fuerza del Centro (Note 6) 3,871,031 4,576,989 40,665,350 36,719,592 Materials for operations - net (Note 7) 18,940,718 18,259,813 Total current assets 77,743,544 66,887,696 Long-term employee loans 2,982,283 2,951,527 Plants, installations and equipment - net (Note 8) 609,581, ,182,387 Financial instruments (Note 12) 5,621,361 6,055,128 Other assets 6,361,494 5,807,768 Intangible assets derived from the actuarial valuation of employee retirement obligations (Note 13) 15,272,590 5,718,083 Total $ 717,563,106 $ 692,602,589 Liabilities and equity Current liabilities: Current portion of long-term debt (Note 11) $ 3,244,007 $ 3,692,192 Current portion of capital lease obligations and PIDIREGAS (Note 10) 6,888,468 7,422,675 Suppliers and contractors 16,190,255 17,647,646 Taxes and fees payable (Note 9) 1,999,271 2,143,275 Other accounts payable and accrued liabilities 8,702,914 8,815,442 Deposits from users and contractors 6,125,628 5,418,622 Total current liabilities 43,150,543 45,139,852 Long-term debt (Note 11) 21,657,462 22,896,087 Financial instruments (Note 12) 6,679,502 6,728,426 Capital lease obligations and PIDIREGAS (Note 10) 48,800,470 48,308,919 Other long-term liabilities 5,440,500 5,607,276 Employee retirement obligations (Note 13) 208,730, ,694,357 Total liabilities 334,459, ,374,917 Equity (Note 15): Accumulated earnings from prior years 381,357, ,476,481 Contributions received 4,734,993 4,318,374 Net income for the year 2,080,381 5,030,548 Insufficiency in restated equity (5,068,793) (2,597,731) Total equity 383,103, ,227,672 Total $ 717,563,106 $ 692,602,589 Ing. Alfredo Elías Ayub Lic. Francisco J. Santoyo Vargas C.P. Conrado Villalobos Díaz C.P. Oscar H. Lara Andrade General Director Finance Director Deputy-director of Finance Control Accounting Manager 3

6 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Statements of Operations For the years ended December 31, 2006 and 2005 (In thousands of Mexican pesos of purchasing power of December 31, 2006) Revenues from energy sales $ 211,531,099 $ 190,735,152 Costs and expenses: Exploitation 158,928, ,624,803 Depreciation 22,558,599 22,698,132 Administrative expenses 4,681,948 3,992,592 Actuarial cost of employee retirement obligations for the year 22,521,927 19,550, ,690, ,866,516 Operating income (loss) 2,840,347 (10,131,364) Other income (expenses) - net (Note 17) 3,613,405 (1,486,327) Net comprehensive financing cost: expense net (4,622,431) (5,362,781) Foreign exchange (loss) gain net (1,126,993) 3,625,580 Monetary position gain 2,120,999 2,280,031 (3,628,425) 542,830 Income tax on distributable surplus (Note 18) (872,233) (819,586) Income (loss) before duties and transfers 1,953,094 (11,894,447) Duties (Notes 3n and 14) (51,782,963) (52,531,542) Transfers from the Federal Government to supplement deficient rates (Notes 3n and 14) 51,910,250 69,879,995 Shortfall of duties over transfers from the Federal Government to supplement deficient rates (Notes 3n and 14) 127,287 17,348,453 Income before cumulative effect of change in accounting at beginning of year 2,080,381 5,454,006 Cumulative effect of change in accounting at beginning of year net - (423,458) Net income $ 2,080,381 $ 5,030,548 Ing. Alfredo Elías Ayub General Director Lic. Francisco J. Santoyo Vargas Finance Director C.P. Conrado Villalobos Díaz Deputy-director of Finance Control C.P. Oscar H. Lara Andrade Accounting Manager See accompanying notes to financial statements. 4

7 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Statements of Changes in Equity For the years ended December 31, 2006 and 2005 (In thousands of Mexican pesos of purchasing power of December 31, 2006) Accumulated earnings from prior years Contributions received Net income (loss) for the year Insufficiency in restated equity Total equity (Note 15) Balances as of January 1, 2005 $ 395,448,195 $ 3,665,183 $ (8,938,944) $ (4,025,482) $ 386,148,952 Transfer of prior year net loss, approved by the Governing Board (5,273,761) (3,665,183) 8,938, Contributions received during 2005 from state and municipal governments and others - 4,318, ,318,374 Comprehensive loss (21,697,953) - 5,030,548 1,427,751 (15,239,654) Balances as of December 31, ,476,481 4,318,374 5,030,548 (2,597,731) 375,227,672 Transfer of prior year net income, approved by the Governing Board 9,348,922 (4,318,374) (5,030,548) - - Contributions received during 2006 from state and municipal governments and others - 4,734, ,734,993 Comprehensive income 3,531,736-2,080,381 (2,471,062) 3,141,055 Balances as of December 31, 2006 $ 381,357,139 $ 4,734,993 $ 2,080,381 $ (5,068,793) $ 383,103,720 Ing. Alfredo Elías Ayub Lic. Francisco J. Santoyo Vargas C.P. Conrado Villalobos Díaz C.P. Oscar H. Lara Andrade General Director Finance Director Deputy-director of Finance Control Accounting Manager See accompanying notes to financial statements. 5

8 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Statements of Changes in Financial Position For the years ended December 31, 2006 and 2005 (In thousands of Mexican pesos of purchasing power of December 31, 2006) Operating activities: Income before cumulative effect of change in accounting principle at beginning of year $ 2,080,381 $ 5,454,006 Items that did not require (generate) resources: Depreciation 22,558,599 22,698,132 Actuarial cost of employee retirement obligations for the period. 22,521,927 19,550,989 Other long-term liabilities (166,776) (80,820) Shortfall of duties over non-cash transfers from the Federal Government to supplement deficient rates (Note 14) (127,287) (10,664,813) 46,866,844 36,957,494 Changes in operating assets and liabilities: (Increase) decrease in: Consumers and other debtors net (4,651,716) (6,162,958) Luz y Fuerza del Centro 705,958 (2,931,232) Materials for operations net (680,905) (137,334) Increase (decrease) in: Suppliers and contractors (1,457,391) 4,676,419 Taxes and fees payable (144,004) (75,837) Other accounts payable and accrued liabilities (112,528) 1,255,260 Deposits from consumers 707, ,363 Employee retirement obligations net (10,851,921) (8,672,308) Transfers from the Federal Government to supplement deficient rates (Note 14) - (6,683,640) (16,485,501) (18,335,267) Net resources provided by operating activities before cumulative effect of change in accounting at beginning of year 30,381,343 18,622,227 Cumulative effect of change in accounting at beginning of year - (423,458) Net resources provided by operating activities 30,381,343 18,198,769 Financing activities: Long-term debt (1,686,810) (1,390,618) Financial instruments (48,924) 6,728,426 Capital lease obligations and PIDIREGAS net (42,656) (2,523,384) Contributions received 4,734,993 4,318,374 Net resources provided by financing activities 2,956,603 7,132,798 (Continued) 6

9 Investing activities: Additions to plants, installations and equipment, less net book value of retirements (26,958,046) (16,325,049) Other assets (553,726) (1,096,799) Financial instruments 433,767 (5,962,052) Employee loans (30,756) (157,353) Net resources used in investing activities (27,108,761) (23,541,253) Cash and cash equivalents: Net increase 6,229,185 1,790,314 Balance at beginning of the year 11,908,291 10,117,977 Balance at end of the year $ 18,137,476 $ 11,908,291 (Concluded) Ing. Alfredo Elías Ayub General Director Lic. Francisco J. Santoyo Vargas Finance Director C.P. Conrado Villalobos Díaz Deputy-director of Finance Control C.P. Oscar H. Lara Andrade Accounting Manager See accompanying notes to financial statements. 7

10 Comisión Federal de Electricidad (A Decentralized Public Entity of the Mexican Federal Government) Notes to Financial Statements For the years ended December 31, 2006 and 2005 (In thousands of Mexican pesos of purchasing power of December 31, 2006) 1. Operations and incorporation Comisión Federal de Electricidad ( Entity" or the "CFE") is a decentralized public entity of the Mexican Federal Government of a technical, industrial and commercial nature with its own legal identity and equity, created by a decree issued by the legislative branch of the Mexican Congress on August 14, 1937, published in the Federal Official Daily Gazette ( DOF ) on August 24, 1937 (which repealed the decree issued by the Congress on December 29, 1933, published in the DOF on January 29, 1934). The Entity mainly renders public electric energy service throughout Mexico, which consists of: generating, conveying, transforming, distributing and supplying electric energy, as well as planning and carrying out all the projects, installations and works required by the national electricity system with respect to planning, execution, operation and maintenance, with the applicable participation of independent energy producers, as provided for in the terms set forth in the public electric energy service and related regulations. The responsibility for rendering public electric energy service is shared by CFE with another Decentralized Public Entity of the Federal Government, referred to as Luz y Fuerza del Centro ( LFC ), which handles the distribution and sale of all types of power consumed, mainly in the metropolitan area of Mexico City and some neighboring states and, to a lesser degree, certain activities related to energy generation and transportation. Approximately 95% of the energy distributed and marketed by LFC in its area of influence is purchased from CFE. The rates applicable to electric power sales in Mexico are defined and authorized by the Federal Government through the Department of Revenues of the Treasury Department ( SHCP ). 2. Basis of presentation Explanation for translation into English - The accompanying financial statements have been translated from Spanish into English for use outside of Mexico. These financial statements are presented on the basis of Mexican Financial Reporting Standards ( MFRS ). Certain accounting practices applied by the Entity that conform with MFRS may not conform with accounting principles generally accepted in the country of use. 3. Summary of significant accounting policies New financial reporting standards - As of June 1, 2004, the function of establishing and issuing MFRS became the responsibility of the Mexican Board for Research and Development of Financial Reporting Standards ( CINIF ) (which differ from the financial reporting standards issued by the SHCP and the Ministry of Public Administration ( SFP ), or NIFG. CINIF decided to rename the accounting principles generally accepted in Mexico ( MEX GAAP ), previously issued by the Mexican Institute of Public Accountants ( IMCP ), as MFRS, individually referred to as NIF s. As of December 31, 2005, eight Series A standards had been issued (NIF A-1 to NIF A-8), representing the Conceptual Framework, intended to serve as the supporting rationale for the development of such standards and as a reference to resolve issues arising in practice; NIF B-1, Accounting Changes and Corrections of Errors, was also issued. The Series A NIFs and NIF B-1 went into effect as of January 1, Application of the new MFRS did not have a material impact on the Company s financial position, results of operations or related disclosures. 8

11 The accompanying financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates. The Entity s management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances. The significant accounting policies of the Entity are as follows: a. Change in accounting policies - Effective January 1, 2005, the Entity adopted provisions of Bulletin C-10, Derivative Financial Instruments and Hedging Activities, thereby recognizing the fair value of financial instruments designated as cash flow hedges. The initial effect for 2005 resulted in the recording of an asset for derivative financial instruments of $239,406 and recognizing other comprehensive income within equity for the same amount. As of December 31, 2005, the fair value of financial instruments increased by $101,716, thus increasing the effect already recognized within equity to $341,122. Additionally, the effect of derivatives for trading purposes represented the recognition of a liability of $423,458 charged to the results of the period as a cumulative effect of change in accounting principle, which is presented in the penultimate line item of such statement before net income for the year. As of December 31, 2005, the Entity had recorded a liability of $801,985, with a charge to results for the effect of a change in accounting at the beginning of the period of $423,458 and an increase in interest expense in the net comprehensive financing result for 2005 of $378,527. b. Recognition of the effects of inflation - The CFE restates its financial statements to Mexican peso purchasing power of the most recent balance sheet date presented, thus recognizing the effects of inflation in financial information. Accordingly, the financial statements of the prior year, which are presented for comparative purposes, have also been restated to Mexican pesos of the same purchasing power and, therefore, differ from those originally reported in the prior year. Recognition of the effects of inflation results mainly in inflationary gains or losses on nonmonetary and monetary items that are presented in certain specific items of the financial statements. c. Cash and cash equivalents - This line item consists mainly of bank deposits in checking accounts and readily available daily investments of cash surpluses. This line item is stated at nominal value plus accrued yields, which are recognized in results as they accrue. d. Materials for operations and cost of consumption - Inventories of materials for operations are recorded originally at average acquisition cost and the related final monthly balances and consumptions are restated using the National Consumer Price Index ( NCPI ). e. Plants, installations and equipment - These assets are recorded at acquisition and/or construction cost, including the following items as part of cost: corporate administrative expenses directly related to the construction and installation of assets, costs of retirements and seniority premiums for full-time employees on construction sites, and depreciation of the equipment used in the construction and installation of the assets. Up to December 31, 1996, assets were restated annually to replacement cost by using capital price indexes of the electric utility industry, determined by CFE specialized experts, except for construction in progress, which continued to be restated by this method until the close of As of January 1, 1997, such assets, as well as those acquired after that date, are restated by the method of adjustments to historical costs for changes in general price levels, using NCPI inflation factors, based on the replacement values determined at the end of 1996, and the acquisition and/or construction cost of those acquired after that date. 9

12 Depreciation of plants, installations and equipment in operation is calculated based on restated values under the straight-line method, starting as of the date on which the assets are placed in operation, using depreciation rates based on the estimated useful lives of the assets, determined by CFE specialized technicians, as follows: Annual rate % Geothermal power plants From 2.00 to 3.70 Steam generating power plants From 1.33 to 2.86 Hydroelectric power plants From 1.25 to 2.50 Internal combustion power plants From 1.33 to 3.03 Gas turbine and combined cycle power plants From 1.33 to 3.03 Nuclear power plant From 1.33 to 2.86 Substations From 1.33 to 2.56 Transmission lines From 1.33 to 2.86 Distribution networks From 1.67 to 3.33 The buildings and assets used for offices and general services are depreciated based on the rates authorized in the Mexican Income Tax Law. f. Impairment of long-lived assets in use - The Entity reviews the book value of its long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of the amounts mentioned above. The impairment indicators considered for these purposes are, among others, operating losses or negative cash flows in the period if they are combined with a history or projection of losses, which in percentage terms in relation to revenues are substantially higher than that of previous years, obsolescence, reduction in the demand for the products manufactured, competition and other legal and economic factors. g. Long-term productive infrastructure projects ( PIDIREGAS ) - In 1996, CFE began investment projects to construct revenue generating assets, under direct budgetary control, using long-term private financing, whose book recognition is deferred over several fiscal years, denominated as PIDIREGAS. The investments in these projects and the liabilities related to the investments are recorded in accordance with NIFG 009 B, Rules for the Accounting Treatment of Investments in Long-Term Productive Infrastructure (PIDIREGAS), issued jointly by the SHCP and SFP. This regulation allows for deferral of the recording of part of the related assets and liabilities to subsequent years, with that portion of the installments due and payable in the current year and the following year recognized by CFE as net assets acquired and related liabilities. The remainder of the deferred liabilities is recognized in memoranda accounts. MFRS requires the accounting recognition of total investments made and all contracted liabilities. Consequently, in order to reflect the investments made and liabilities contracted and present better financial information, effective January 1, 2002, the Entity recognizes the aforementioned deferred assets and liabilities in the accompanying financial statements, whose principal result as of December 31, 2006 and 2005, is the recognition of a liability of $47,783,822 and $46,995,703, respectively, and an increase of plants, installations and equipment for a similar amount at those dates. Separate financial statements were prepared and issued for use in the preparation and integration of the Mexican Federal Public Treasury Account, in compliance with NIFG 009 B. h. Derivative financial instruments - The Entity states all derivatives at fair value in the balance sheet, ( mark to market ), regardless of the purpose for holding them. When derivatives are designated as hedges, the recognition of changes in the fair value in the financial statements depends on whether it is a fair value hedge or a cash flow hedge. 10

13 Changes in the fair value of derivative instruments designated as hedges are recognized as follows: (1) for fair value hedges, changes in both the derivative instrument and the hedged item are recognized in current earnings; (2) for cash flow hedges, changes are temporarily recognized as a component of other comprehensive income and then reclassified to current earnings when affected by the hedged item. The ineffective portion of the change in fair value is immediately recognized in current earnings, within comprehensive financing cost, regardless of whether the derivative instrument is designated as a fair value hedge or a cash flow hedge. The Entity uses interest rate and currency swaps and currency forward contracts to manage its exposure to interest rate and foreign currency fluctuations. CFE formally documents all hedging relationships, including their objectives and risk management strategies to carry out derivative transactions. As a policy, the Entity does not carry out derivative transactions of a speculative nature. While certain derivative financial instruments are contracted for hedging from an economic point of view, they have not been designated as hedges for accounting purposes. Accordingly, changes in fair value are recognized in comprehensive financing results. As of January 1, 2005, hedging derivative instruments are recorded as assets or liabilities without offsetting them against the hedged items; until December 31, 2004, the applicable accounting standard required offsetting. i. Other long-term liabilities - In accordance with federal regulations, when a nuclear power plant terminates its operations (due to expiration of licenses), it must be dismantled for security and environmental protection reasons. The CFE s policy is to prepare a technical economic study, which must be periodically updated (every five years) and covers the respective estimated cost based on electricity production of the Laguna Verde Nucleoelectric Station, which is recognized for accounting purposes uniformly over the useful life and, in accordance with Bulletin C-9, Liabilities, Provisions, Contingent Assets and Liabilities, and Commitments, must be compared to present value calculations. In 2005, the Entity updated the technical economic study, based on studies prepared by international companies on the dismantling of similar plants, for purposes of determining the funds necessary to dismantle the nucleoelectric station. As a result, the reserve was increased from US $312 million to US $500 million in The original estimate changed due to the inclusion of radioactive waste cooling, transportation and storage costs. Such expenses will be amortized over the remaining useful life of the station. At December 31, 2006, total liabilities at present value are $5,440,500, and US $121 million (equivalent to $1,326,997) has been reserved by charging results of prior years. The asset at present value is shown in the balance sheet as other assets of $4,113,503. j. Employee retirement obligations - Liabilities for seniority premiums, pensions and severance payments are recorded as accrued and are calculated by independent actuaries based on the projected unit credit method using actual interest rates. Therefore, the Entity is recording the liability that at present value is estimated to cover these obligations at the estimated retirement date of all employees that work for the Entity. The revisions to Bulletin D-3, Labor Obligations, effective beginning January 1, 2005, related to recognition of the liability for severance payments for reasons other than restructuring, are recorded using the projected unit credit method based on calculations by independent actuaries. Bulletin D-3 grants the option to immediately recognize, in current earnings, the resulting transition asset or liability, or to amortize it over the average remaining labor life of employees. Accordingly, since 1993, the CFE includes in its actuarial calculations the severance payments related to contractual commitments and therefore, the adoption of this bulletin did not produce additional recognition effects in the balance sheet and the statement of operations, and it only adopted the disclosures required by such bulletin. k. Revenue recognition - Revenues from energy sales are recognized in the period in which energy is consumed by customers. 11

14 l. Unbilled energy sold - Energy that has been delivered and is in the process of being billed is treated as revenue for the year, and its amount is estimated based on the actual billing of the immediately preceding bimester. m. Foreign currency transactions - Transactions in foreign currency are recorded at the exchange rate in effect at the transaction date, and monetary assets and liabilities in foreign currency are adjusted in Mexican pesos at the exchange rate in effect at the close of the year, affecting results as part of net comprehensive financing cost. n. Transactions with federal, state and municipal governments - The principal transactions performed with federal, state and municipal governments and the respective accounting treatment, are as follows: Federal Government- Duties - In accordance with Article 46 of the Mexican Electric Utility Public Service Law, effective December 23, 1992, CFE is required to pay a fee to the Federal Government for the assets it uses to render electric utility public service. Duties are determined annually based on the profitability rate established for state-owned entities in each year; for 2006 and 2005, the rate was 9%, which was authorized by SHCP. Such rate is applied to the value of the net operating assets of the immediately preceding year and the resulting amount is charged to the results of the year. The annual duty expense is compared with the transfers to supplement deficient rates (subsidy). Up to 1999, a net liability had been generated in favor of the Federal Government, which was not payable, but was capitalized in equity at the close of each year; however, since fiscal 2000 the amount of the duties has been below that of the subsidy, with the insufficiency directly affecting the Entity s equity. Transfers to supplement deficient rates - This item refers to resources that the Federal Government grants to users of the electric power service through CFE by applying subsidized rates for energy sales. A significant part of these transfers is treated as non-cash transactions, because under the current Mexican Electric Power Public Service Law such transactions are credited against the duties payable by the Entity. During 2006, CFE recorded only virtual transfers. These transfers are credited to results of the year in which they are presented and are shown in the statements of operations. State and Municipal Governments- Contributions - Contributions received from federal, state and municipal governments for the electrification of rural settlements and low-income districts, as well as from private parties to expand the distribution network, are recorded as an increase in equity. o. Restatement of equity - Since the equity of CFE consists of contributions received and results obtained that are capitalized each year and decreased for withdrawals from equity, the restatement of these different components was determined by indexing the original amounts, based on the dates of contribution, withdrawal or generation, in order to present figures in Mexican pesos of purchasing power of December 31, 2006, using NCPI inflation factors. p. Insufficiency in restated equity - This item represents the difference between the restatement of materials for operation and fixed assets based on specific costs and the restatement of the different components of equity by applying NCPI factors. The effects recorded in this account during 2006 and 2005, represent the net (decrease) increase in fixed assets acquired under the PIDIREGAS programs, which are restated based on the movement of the exchange rate, equivalent to specific cost, compared to the restatement obtained by restating the assets in accordance with NCPI factors. 12

15 Starting in 2002, CFE has conducted a review of the restated values of its plants, installations and equipment. Similarly, in 2004 CFE started a national-level fixed asset physical inventory program for its distribution area. Based on the reviews and the above inventory program, the Entity has made adjustments that have increased equity and been recorded in the results of the year. As the effect of these adjustments is not significant, the Entity recorded them as an effect of the year. q. Net comprehensive financing cost - Net comprehensive financing cost includes all financial revenue or expense items, such as interest, exchange results and monetary position result, as they accrue. r. Comprehensive income (loss) - Comprehensive income (loss) presented in the accompanying statement of changes in equity is comprised of the net income of the year, plus other comprehensive income (loss) items of the same period which, in accordance with MFRS, are presented directly in equity without affecting the statements of operations (Note 16). s. Monetary position gain - Monetary position gain, which represents the effects of inflation on the purchasing power of monetary items, is determined by applying the NCPI inflation factor to the net monetary liability at the start of each month. Gains result from maintaining a net liability monetary position. t. Statement of changes in financial position - The statements of changes in financial position present the changes in constant currency, based on the financial position at the close of the prior year, restated to Mexican pesos of the close of the latest year. u. Reclassifications - The financial statements for the year ended December 31, 2005, have been reclassified in certain amounts in order to conform to the presentation for the year ended December 31, Cash and cash equivalents At December 31, 2006 and 2005, cash and cash equivalents are as follows: Cash and banks $ 10,628,572 $ 7,446,816 Temporary investments 7,508,904 4,461,475 $ 18,137,476 $ 11,908, Consumers and other debtors At December 31, 2006 and 2005, accounts and notes receivable are summarized below: Public consumers $ 16,904,816 $ 15,209,290 Government consumers 3,525,724 2,628,935 Energy sold in the process of being billed 8,497,675 8,129,616 28,928,215 25,967,841 Allowance for doubtful accounts (1,062,861) (926,770) 27,865,354 25,041,071 Other debtors 4,907,101 3,957,600 Value-added tax 4,021,864 3,143,932 $ 36,794,319 $ 32,142,603 13

16 6. Luz y Fuerza del Centro ( LFC ) The balances of the receivable from LFC at December 31, 2006 and 2005 amounting to $3,871,031 and $4,576,989, respectively, are derived from transactions carried out between that entity and CFE, in accordance with the energy buy and sell agreement entered into by both parties. During the years ended December 31, 2006 and 2005, transactions between these entities that affected the results of CFE are presented below, and revenues are recorded under the revenues from energy sales heading and costs under the exploitation cost heading: Sales of energy to LFC $ 45,172,344 $ 39,954,536 Exploitation cost and expenses- purchases of energy from LFC $ 1,425,956 $ 894, Materials for operations As of December 31, 2006 and 2005, materials for operations are as follows: Spare parts and equipment $ 12,499,392 $ 12,597,247 Fuel and lubricants 5,552,379 4,726,154 Nuclear fuel 1,143,215 1,188,023 19,194,986 18,511,424 Allowance for obsolescence (254,268) (251,611) $ 18,940,718 $ 18,259, Plants, installations and equipment Plants, installations and equipment at December 31, 2006 and 2005, are as follows: Plants, installations and equipment in operation, net $ 587,224,608 $ 584,804,897 Construction-in-progress 16,887,085 15,769,066 Materials for construction 4,036,080 3,116, ,147, ,690,198 Fixed assets for sale 1,434,061 1,492,189 $ 609,581,834 $ 605,182,387 14

17 Plants, installations and equipment in operation - The balances of plants, installations and equipment in operation at December 31, 2006 and 2005, which include leased equipment, are summarized as follows: Plants: Steam $ 239,299,856 $ 252,533,361 Hydroelectric 145,651, ,488,708 Nuclear 81,512,757 69,906,296 Gas turbine and combined cycle 41,991,777 33,070,781 Geothermal 18,492,010 15,948,290 Internal combustion 6,284,228 4,639,959 Unconventional installations 91,905 88,302 Transmission lines and transformation substation 286,426, ,000,998 Distribution networks 118,055, ,025,944 Land in the process of regulation 384, ,910 Administrative buildings and other 76,310,789 73,794,884 1,014,500, ,856,433 Accumulated depreciation (427,276,342) (412,051,536) $ 587,224,608 $ 584,804,897 During 2005, CFE recorded the retirement of 10 thermoelectric stations of the generating station retirement program, with a capacity of 1, Mega Watts ( MW ), which are gradually being retired from the cold reserve due to their aging and operating inefficiency. The net book value of these stations was $2,573,215, and the respective write of was, and included in other expenses. Negotiations are in progress to sell to the National Water Commission ( CNA ) land, containers and dam channels of the Miguel Alemán Hydroelectric System, which CFE temporarily delivered in 1983 and are currently managed by CNA. The net value of such assets is shown as fixed assets for sale. In recent years, due to the reduction in annual budgets, CFE has not fully complied with required maintenance, which might affect the estimated useful life of certain plants, installations and equipment. During 2006 and 2005, expenses incurred in this regard were considered sufficient by management. Construction in-progress - The balances of construction-in-progress at December 31, 2006 and 2005, are as follows: Plants: Steam $ 353,877 $ 113,651 Hydroelectric 2,947,436 3,027,127 Geothermal 496,467 1,078,518 Internal combustion 55,321 56,284 Nuclear 143,958 77,483 Gas turbine and combined cycle 1,286,502 1,338,264 Networks and substation lines 9,751,818 8,071,427 Offices and general installations 864,428 1,171,845 Construction advances 987, ,467 Total $ 16,887,085 $ 15,769,066 During the years ended December 31, 2006 and 2005, the items capitalized in construction-in-progress in accordance with the policy described in Note 3e were $2,260,552 and $2,768,870, respectively ($440,717 and $921,694 in administrative expenses, $108,836 and $89,807 for depreciation, and $1,710,999 and $1,757,369 of increase to the provision for retirement and seniority premiums in 2006 and 2005). 15

18 Materials for construction - The balances of materials for construction at December 31, 2006 and 2005, are summarized below: Spare parts and equipment $ 4,033,189 $ 3,105,754 Materials in the possession of third parties 2,742 10,326 Equipment in transit $ 4,036,080 $ 3,116, Taxes and fees payable Taxes and fees payable at December 31, 2006 and 2005, are as follows: Payable by CFE: Income tax distributable surplus $ 852,007 $ 803,855 Income tax payable on account of third parties 161, ,143 Contributions to the Mexican Social Security Institute (includes retirement insurance) 341, ,254 Fees for the use of national waters 242, ,342 2% on salaries 20,638 20,507 Contributions to the National Workers Housing Fund 8,368 7,894 Subtotal 1,627,866 1,798,995 Withheld by CFE: Tax on employee salaries 247, ,027 Withheld value-added tax 84,888 68,636 Income tax on foreign interest 15,504 16,684 Income tax on payments to foreign residents 847 1, % ad valorem tax on contractors 14,983 8,588 Income tax on fees and leases 6,652 5, % ad valorem tax on contractors 1,074 1,129 Others 10 7 Subtotal 371, ,280 Total $ 1,999,271 $ 2,143, Capital lease obligations and PIDIREGAS The obligations originated by the acquisition of plants, installations and equipment through capital leases were recorded in accordance with Bulletin D-5, Leases, of the MFRS and debt due to PIDIREGAS (Note 3g) as of December 31, 2006 and 2005, is summarized as follows: 16

19 17 Amount of Agreed Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Rates Payments Equal to Yields Asset Type Equipment Value Utilized commissions and fiduciary fees Principal Payments at December 31, 2006 Contract Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term EXTERNAL DEBT CAPITAL LEASE ASSETS IN COMMERCIAL OPERATIONS million euros 2.0% 20.0 million euros million euros Principal Until $ 28,473 $ 384,382 1,988 26,833 $ 26,283 $ 381,102 1,988 28,821 2 Integral Thermo-electric units $1,081.2 million 2021 with 350 MW capacitand each (75.48 million euros) for C.T. TUXPAN Units 3 and 4 commissions $191.4 million (13.36 million euros) Fiduciary fees fiduciary fees $202.7 million $94.88 million 2 Integral thermoelectric units million U.S. dollars 2.75% million U.S. dollars million U.S. dollars Principal Until 11, ,356 1,070 17,127 12, ,072 1,071 18,197 with 160 MW capacity each $3,814.2 million 2013 one each for C.T. TOPOLOBAMPO ( million U.S dollars) II Units 1 and 2 and commissions $2,428.0 million ( million U.S dollars) Fiduciary fees Fiduciary fees $2,095.0 million $ million 2 Integral hydroelectric units million U.S. dollars 9.0% million U.S. dollars million U.S. dollars Principal Until 175,500 93,707 16,129 8, , ,459 43,477 24,741 with 211 MW capacity each $4,877.5 million 2008 for C.H. HUITES ( million U.S dollars) and commissions $3,106.9 million ( million U.S dollars) 2 Integral thermoelectric units million U.S. dollars Variable and 8.41% million U.S. dollars million U.S. dollars Principal Until ,448-35,708 - with 350 MW capacity each $8,392.0 million 2006 for C.T. TUXPAN Units 5 and 6 ( million U.S dollars) and commissions $4, million (372.5 million U.S dollars) Fiduciary fees Fiduciary fees $302.6 million $ million 2 Integral hydroelectric units million U.S. dollars 2.5% million U.S. dollars million U.S. dollars Principal Until 18, ,285 1,673 27,781 48, ,308 4,365 29,454 with 100 MW capacity each $2,273.5 million 2026 for C.H. TEMASCAL II ( million U.S dollars) Units 5 and 6 and commissions $1,151.6 million ( million U.S dollars) Fiduciary fees Fiduciary fees $150.6 million $83.98 million Transmission Line million U.S. dollars 8.9% 23.6 million U.S. dollars million U.S. dollars Principal Until 33,530 33,530 3,082 3,082 34,557 69,116 3,082 6,163 TUXPAN - TEXCOCO $483.9 million 2008 (44.47 million U.S dollars) and commissions $250.5 million (23.02 million U.S dollars) TOTAL EXTERNAL DEBT $ 267,349 $ 1,000,260 $ 1,009,821 $ 1,262,057

20 18 Amount of Agreed Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Rates Payments Equal to Yields Asset Type Equipment Value Utilized commissions and fiduciary fees Principal Payments at December 31, 2006 Contract Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term INTERNAL DEBT CAPITAL LEASE 2 Integral thermoelectric units each $1,137.6 million 8.6% $173.9 million $1,137.6 million Principal Until $ - $ $ 394,576 $ with capacity of 350 MW for $1,137.6 million 2006 the TUXPAN C.T. Units 5 and 6 and commissions $173.9 million 2 Integral thermoelectric units $561.3 million 8.6% $85.8 million $561.3 million Principal Until , with capacity of 100 MW each $561.3 million 2006 for the TEMASCAL II C. H. and commissions $85.8 million Transmission line $163.9 million 9.05% $39.7 million $163.9 million Principal Until 32,776 16, ,106 51, TUXPAN - TEXCOCO $114.7 million 2008 and commissions $35.1 million TOTAL INTERNAL DEBT $ 32,776 $ 16,388 $ 623,376 $ 51,159 TOTAL EXTERNAL AND INTERNAL DEBT FROM FINANCIAL LEASES $ 300,125 $ 1,016,648 $ 1,633,197 $ 1,313,216

21 19 Amount of Agreed Total Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Payments Equal to Yields Project Amount, Taxes, Other (equivalent in Asset Type Installation Value Expenses and Fiduciary Fees Principal Payments at December 31, 2006 Contract Term thousands of pesos) Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term PIDIREGAS EXTERNAL DEBT 3 Combined cycle modules million U.S. dollars million U.S. dollars million U.S. dollars Principal Until $ 7,629,973 $ 599,529 $ 2,618,533 55, ,652 $ 608,809 $ 3,316,710 54, ,751 with a nominal generation capacity of of interest $4,412.2 million MW each (405.5 million U.S. dollars) for C.C.C. Samalayuca II. M - 1, 2 and 3. $4,174.0 million (383.6 million U.S. dollars) 4 Integral geothermoelectric million U.S. dollars 71.3 million U.S. dollars million U.S. dollars Principal Until 1,124,399 87, ,010 8,080 42,736 90, ,879 8,080 50,816 units with a 100 MW total capacity of interest $571.3 million 2015 for C.G. Cerro Prieto IV (52.5 million U.S. dollars ) 4.9 million U.S. dollars $562.5 million in taxes (51.7 million U.S. dollars) million U.S. dollars in fiduciary fees Taxes $39.2 million (3.6 million U.S. dollars) Fiduciary fees $3.4 million (0.316 million U.S. dollars) 2 Combined cycle modules million U.S. dollars million U.S. dollars million U.S. dollars Principal Until 3,602,557-3,602, ,087-3,712, ,087 with total capacity of MW of interest One payment of million 2015 for C.C.C. Monterrey II of dollars in 2010 and other of 17.5 in 2015 $1,953.1 million (179.5 million U.S. dollars) Taxes and fiduciary fees 17.2 million U.S. dollars $103.4 million in taxes and (9.5 million U.S. dollars) fiduciary fees 1 Combined cycle module million U.S. dollars million U.S. dollars million U.S. dollars Principal Until 3,018, ,638 1,486,373 21, , ,861 1,774,801 21, ,259 with capacity of 445 MW, of interest $1,050.3 million 2016 for C.C.C. Chihuahua (119.1 million U.S. dollars) $1,113.1 million (102.3 million U.S. dollars) Taxes and fiduciary fees 6.4 million U.S. dollars $36.5 million in taxes and (3.35 million U.S. dollars) fiduciary fees 1 combined cycle module million U.S. dollars million U.S. dollars million U.S. dollars Principal Until 3,349, ,899 2,527,994 14, , ,723 2,765,137 13, ,567 with a capacity of MW of interest $997.3 million 2016 for C.C.C. Rosarito III, Units 8 and 9 (61.2 million U.S. dollars) $1,665.9 million (153.1 million U.S. dollars) 30.5 million U.S. dollars Taxes and fiduciary fees in taxes and $105.1 million fiduciary fees (9.656 million U.S. dollars) 2 Integral geothermoelectric units 18.2 million U.S. dollars 9.1 million U.S. dollars 18.2 million U.S. dollars Principal Until 198,019 25, ,279 2,356 9,951 26, ,025 2,356 12,308 with a total capacity of 10 MW of interest $63.1 million 2011 for C.G. Tres Virgenes (5.8 million U.S. dollars) $69.6 million (6.4 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $3.0 million fiduciary fees (0.275 million U.S. dollars)

22 20 Amount of Agreed Total Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Payments Equal to Yields Project Amount, Taxes, Other (equivalent in Asset Type Installation Value Expenses and Fiduciary Fees Principal Payments at December 31, 2006 Contract Term thousands of pesos) Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term 1 unit thermoelectric 39.4 MW 61.3 million U.S. dollars 29.1 million U.S. dollars 61.3 million U.S. dollars Principal Until 666,697 69, ,836 6,405 31,783 66, ,265 5,894 38,188 at C.D. Puerto San Carlos II of interest $250.3 million 2011 (23.0 million U.S. dollars) $214.4 million (19.7 million U.S. dollars) 1.1 million U.S. dollars Taxes and fiduciary fees in taxes and $6.9 million fiduciary fees (0.633 million U.S. dollars) LT 211 SUBMARINE CABLE million U.S. dollars 50.3 million U.S. dollars million U.S. dollars Principal Until 1,088,306 84, ,865 7,801 15, , ,590 13,278 23,504 of interest $832.4 million 2009 (76.5 million U.S. dollars) $507.1 million (46.6 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $28.8 million y fiduciary fees (2.65 million U.S. dollars) SE 212 y 213 SF6 POWER DISTRIBUTION million U.S. dollars million U.S. dollars million U.S. dollars Principal Until 1,906,113 85,737 1,224,358 7, ,523 88,365 1,350,252 7, ,402 of interest $595.2 million 2014 (54.7 million U.S. dollars) $1,044.6 million (96.0 million U.S. dollars) 8.15 million U.S. dollars Taxes and fiduciary fees in taxes and $44.6 million fiduciary fees (4.1 million U.S. dollars) LT 214 and 215 SOUTHEAST PENINSULAR million U.S. dollars million U.S. dollars million U.S. dollars Principal Until 1,449,147 63,027 1,093,484 5, ,495 61,837 1,190,742 5, ,178 of interest $292.7 million 2015 (26.9 million U.S. dollars) $827.0 million (76.0 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $92.4 million fiduciary fees (8.49 million U.S. dollars) LT 216 and 217 NORTHWEST million U.S. dollars 83.0 million U.S. dollars million U.S. dollars Principal Until 1,198,908 53, ,932 4,951 75,998 53, ,808 4,729 80,949 of interest $317.7 million 2009 (29.2 million U.S. dollars) $676.8 million (62.2 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $28.6 million fiduciary fees (2.627 million U.S. dollars) SE 218 NORTHWEST 50.7 million U.S. dollars 34.1 million U.S. dollars 50.7 million U.S. dollars Principal Until 551,198 47, ,562 4,398 23,671 45, ,783 4,075 28,069 of interest $244.8 million 2015 (22.5 million U.S. dollars) $261.1 million (24 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $9.1 million fiduciary fees (0.836 million U.S. dollars)

23 21 Amount of Agreed Total Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Payments Equal to Yields Project Amount, Taxes, Other (equivalent in Asset Type Installation Value Expenses and Fiduciary Fees Principal Payments at December 31, 2006 Contract Term thousands of pesos) Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term SE 219 SOUTHEAST - PENINSULAR 33.8 million U.S. dollars 16.8 million U.S. dollars 33.8 million U.S. dollars Principal Until 367,722 40,382 70,251 3,711 6,456 40, ,989 3,567 10,164 of interest $263.3 million 2009 (23.6 million U.S. dollars) $167.6 million (15.4 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $4.7 million fiduciary fees (0.436 million U.S. dollars) SE 220 EASTERN - CENTRAL 62.8 million U.S. dollars 42.5 million U.S. dollars 62.8 million U.S. dollars Principal Until 683,855 52, ,035 4,780 34,099 49, ,012 4,417 38,879 of interest $277.7million 2009 (23.9 million U.S. dollars) $354.7 million (28.7 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $12.5 million fiduciary fees (1.15 million U.S. dollars) SE 221 WESTERN 72.5 million U.S. dollars 52.3 million U.S. dollars 72.5 million U.S. dollars Principal Until 788,992 55, ,936 5,071 44,200 57, ,547 5,102 49,271 of interest $252.4 million 2014 (23.2 million U.S. dollars) $388.1 million (34.3 million U.S. dollars) million U.S. dollars Taxes and fiduciary fees in taxes and $6.2 million fiduciary fees (0.567 million U.S. dollars) L.T. 301 CENTRAL 44.5 million U.S. dollars 16.8 million U.S. dollars 44.5 million U.S. dollars Principal Until 484,682 51, ,204 4,692 18,767 52, ,079 4,692 23,459 of interest $229.4 million 2011 (21.1 million U.S. dollars) $133.2 million (12.2 million U.S. dollars) L.T. 302 SOUTHEAST 41.2 million U.S. dollars 18.7 million U.S. dollars 41.2 million U.S. dollars Principal Until 447,826 46, ,570 4,291 18,433 33, ,836 3,019 22,724 of interest $200.6 million 2011 (18.4 million U.S. dollars) $144.4 million (13.3 million U.S. dollars) L.T. 303 IXTAPA - PIE DE LA CUESTA 27.7 million U.S. dollars 11.6 million U.S. dollars 27.7 million U.S. dollars Principal Until 301,181 30, ,472 2,768 11,072 31, ,205 2,768 13,840 of interest $150.6 million 2011 (13.8 million U.S. dollars) $94.8 million (8.7million U.S. dollars) L.T. 304 NORTHWEST 28.2 million U.S. dollars 14.1 million U.S. dollars 28.2 million U.S. dollars Principal Until 307,066 30, ,827 2,822 11,288 31, ,241 2,822 14,110 of interest $153.5 million 2011 (14.1 million U.S. dollars) $115.0 million (10.6 million U.S. dollars) L.T. 305 CENTRAL - EASTERN 36.5 million U.S. dollars 17.7 million U.S. dollars 36.5 million U.S. dollars Principal Until 396,924 39, ,770 3,648 14,591 40, ,546 3,648 18,239 of interest $198.5 million 2011 (18.2 million U.S. dollars) $143.2 million (13.2 million U.S. dollars)

24 22 Amount of Agreed Total Balances at December 31, 2006 (Thousands) Balances at December 31, 2005 (Thousands) Payments Equal to Yields Project Amount, Taxes, Other (equivalent in Asset Type Installation Value Expenses and Fiduciary Fees Principal Payments at December 31, 2006 Contract Term thousands of pesos) Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term L.T 306 SOUTHEAST 45.0 million U.S. dollars 18.9 million U.S. dollars 45.0 million U.S. dollars Principal Until 489,525 48, ,810 4,499 17,996 50, ,265 4,499 22,494 of interest $244.8 million 2011 (22.5 million U.S. dollars) $154.9 million (14.2 million U.S. dollars) L.T. 307 NORTHEAST 24.3 million U.S. dollars 12.5 million U.S. dollars 24.3 million U.S. dollars Principal Until 264,836 26, ,934 2,434 9,736 27, ,476 2,434 12,170 of interest $132.4 million 2011 (12.2 million U.S. dollars) $103.0 million (9.5 million U.S. dollars) L.T. 308 NORTHWEST 44.1 million U.S. dollars 21.2 million U.S. dollars 44.1 million U.S. dollars Principal Until 480,185 48, ,222 4,413 18,033 45, ,729 4,032 22,447 of interest $235.9 million 2014 (21.7 million U.S. dollars) $169.2 million (15.6 million U.S. dollars) SE 401 WESTERN - CENTRAL 64.3 million U.S. dollars 22.2 million U.S. dollars 64.3 million U.S. dollars Principal Until 699,648 72, ,474 6,706 32,577 75, ,544 6,706 39,283 of interest $272.2 million 2013 (25.0 million U.S. dollars) $148.9 million (13.7 million U.S. dollars) SE 402 EASTERN PENINSULAR 73.1 million U.S. dollars 18.5 million U.S. dollars 73.1 million U.S. dollars Principal Until 795,691 79, ,630 7,313 40,220 82, ,054 7,313 47,532 of interest $278.5 million 2013 (25.6 million U.S. dollars) $113.9 million (10.5 million U.S. dollars) L.T. 403 NORTHEAST 72.5 million U.S. dollars 26.8 million U.S. dollars 72.5 million U.S. dollars Principal Until 788,817 81, ,994 7,485 31,706 83, ,513 7,485 39,191 of interest $362.4 million 2011 (33.3 million U.S. dollars) $203.8 million (18.7 million U.S. dollars) L.T. 404 NORTHWEST - NORTH 40.5 million U.S. dollars 15.1 million U.S. dollars 40.5 million U.S. dollars Principal Until 440,653 47, ,857 4,385 17,540 49, ,886 4,385 21,926 of interest $202.1 million 2013 (18.6 million U.S. dollars) interest $117.0 million (10.8 million U.S. dollars) SE 405 HIGH TENSION COMPENSATION 8.6 million U.S. dollars 2.2 million U.S. dollars 8.6 million U.S. dollars Principal Until 93,450 9,345 51, ,746 9,631 62, ,605 of interest $32.5 million 2012 (3.0 million U.S. dollars) $13.4 million (1.2 million U.S. dollars) L.T. 406 NETWORK ASSOCIATED WITH million U.S. dollars 44.0 million U.S. dollars million U.S. dollars Principal Until 1,326, , ,870 12,374 62, , ,546 12,374 75,040 TUXPAN II, III and IV of interest $510.3 million 2014 (46.9 million U.S. dollars) $311.2 million (28.6 million U.S. dollars)