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L-145RESTRICTED
This report is restricted to use within the Bank.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
FIRST LOAN ADMINISTRATION REPORT
ON THE
BANK'S LOANS TO MEXICO
March 12, 1952
Loan DepartmentEdition B
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I -U.S. $1 - .8.65 pesos
1 peso -- U.S. $0.12
| 1 million pesos.- U.S. $1.15,607
I
FIRST LOAN ADMMNLTTktfION iEPOrT
TABLE OF CONTENTS
Parafpraihns
INTRODUCTION
PART ONE - Loan of W424,100,000 to Nacional Financiera, S.A.and Comision Federal de Electricidad (ComisionProject)
I, NEGOTIATIONS 1,- 2
II, THE LOAN 3 - 6
III. THE BORRCWERS 7 - 11
IT. THE PROJECT 12 - 1.3
V4v CHANGES IN THE PROJECT 14 - 126
VI.. PRCGRESS OF-THE PROJECT 27 - 34
VIIe EFFECTS OF THE LOAN 35 _-.39
VTII. FINANCIAL POSITION OF CFE 40 - 44
PART TWO (a) Loan of $10,000,000 to Nacional Financiera, S.A.and Comision Federal de Electricidad (MexlightProject)
(b) Loan of $426,000,0O0 to The Mexican Light andPower Company, Limited
I. NEGOTIATIONS 45- 48
II. THE LOAN 49 53
ITTT THE BORROWER 5L4 56.
T- vwTH FRo.TFCT 57 -
V. rWANGFS TN T4E PRO.T7rT 59 - 6t)
VIT PRrr.PRESOF n. TJFROJrT 6 _ 6
VTT r-PV7'r'rV M 'PUP. Tf)MAW AI
VTTT Tnr AT TPtT.UA AP C* ,11_,,J.~* VJVWflL * J^;VAS*fl'4..f' -.1 I
TIv FTTATICITAT OnSrTIrO QvW UEYTT('3'T '72 *A." a U .UV lfl'J.914J U ...-. L4 J.IJ. -JX *hLflJJAAI
Paragraphs
PART THREE - Line of Credit of t1O,pOO,OOO in Favor ofConsortium of Commercial Banks and NacionalFinanciera' S. A.
I. NEGOTIATIONS 83 - 86
II. THE LINE OF CREDIT 87- .90
III. LOANS GRANTED 91 - 95
PART FOUR S Relations Between the Bank and the UnitedMexican States
I. POLITICAL AND GENERAL 96 - 98
II. CONSULTATION, NEGATIVE PLEDGE 99 - 102
III. ENABLING LEGISLATION 103 - 106
IV. COMBINED WORKING PARTY 107 - 109
ANNEX A - Annual Report T The Miexican Light andPow,er Compar-y, Ltd.
It is expected that the forthcoming report of the combined Bank-Mexican'Working Party (see paragraph 108):,will throw new light on the Mexican economyand that, in.particular, it will,contain statistics of foreign trade, na-tional income and produc,tion;.which will'supersede those at present available.For,this.rea$on, no econ6mic"section is'included in the present Report, andthe usual Table of Basic Statistics is omitted.
FIRST LOAN ADIMINISTRATION REPORT
INTRODUCTION
This report deals with the following loans:
,2M,100,000 25 yaear 4% loan of January 6, 1949 toNaeional Financiera. S.A.. ind ComisionFederal de Electricidad for the lattertselectrin power dpvelopment nrogram;
$10,aoo,00t Iea- Lk itnteroim loan of .Tanuary. 6; l9L9to Nacional Financiera, S.A.,- and ComisionLoeqn?-Ml de Elec1 +t-e.^; ̂ na fonr f.th Al Pn.trj,r
poaver development program of The M.9exicanT4Light ar Power" re-v,v,r Tjmnit+d. (Ref1lnded
April 28, 1950).
$26,o000,QOQ 25 year Wi% loan of April 2a, 1950 to ThemexicsLtar, 4iIVt, aln"d Pr-rr VpVG- -VlF+^v8 4
for refunding the above $10 million interim
loan and, 4to prov'dAe lul WIV J.ancn fo1CP,4r,
the electric power development program;
$10,000,400 3 2B line of credit of October 18, 1950 in
favor of consortium of CoV-1imercia1 baks
and Nacional Financiera, S.A,
Deducting the refunded $10 million interim mexlight
Project Loan, the Bank nas granted Mexico credits total-ing $60,100,000,. Of this tota4, $27.4 million have been
disbursed as of September 30, 1951.
PART ONE.
Loan of 92h.100.000 to Nacional Financiera. SA...
and Comision-Federal de Electricidad (Comision Project)
I. NEGOTIATIONS
1. In April 1948, Nacional Financ4era,-S. A., ("Financieralt) applied
to the Bank for a lo4n of about $109 million to finance the balance of
the foreign exchange costs of the 19h7-52 construction program of the
Comision Federal de Electricidad ("tCE"). The Bank and the Miexican
*- 2 -
Government had previously agreed that, among a wide.-range of developmentPriottsc discussed with thei Pnnk in 1Q)i7- e_IletriG npwer nuvht to have
priority.
2. As a result of discussions between the Bank and CFE, it was agreed.J~in N V ~IflL;1;. +ha+, forI- bo+ financ4a ar.d ei r. reas -- omns,it w-a
advisable to confine attention for the time being to the most urgentlyneeded par+s ofe pP anmd,rv.m n,nA *nroie so.. of , h ha a1readnyr
been begun with the help of financing from the Export-Import Bank and otherbstJturc es, )0re 0 S r A 4. A 1he accol-d i_- 1 -S U*S cv ffi.; n
was made in consultation with the private companies serving the areas con-wased ma gre tho esrfulcodntowihhirxpsonlareascn%.W. L1iU, .LAi )J.L lAVJ. L t1V =1 .± .LW LJ.LJ. %).AJV±.LU.LIA tU.&'I IV.WVA VLOL.41.A~
II, THE LOAN
3. On january 6, 1949, the Bank grarnted a loan of $24L,100,000 to Nacion-al Financiera, S.A. (utFinancieralt) and Comision Federal de Electricidad(k1CFE'0) as co-borrowers, The Loan became effective on Harch 15,7 199,The Closing Date is December 31, 1952. Amortization, calculated to retirethe Loan by its maturity on August o,i973, begins on February 1, 1953.Interest is at the rate of bs per annum (including the statutory 1% com-mission).. The Loan is guaranteed by the mexican Government.
.4. It was agreed that an amount not exceeding $4 million of- the Loancould be applied to purchases of electrical equipment within M..exico. Thisauthorization was based on the fac t that the production of electricalgoods.in Mexico mainly takes the form of the assembly of components im-ported from the U.S. The price of these goods therefore contains a sub-stantial dollar element.
5. As of September 30, 1951, some U. S. $12.8 million of the Loanhad been disbursed'. Of this amount, approximately $ll.7 million was dis-bursed in U. S. dollars, the equivalent of $ .8 million in Canadian dollars,the-equivalent of.$ .3 million in $wiss francs, and the equivalent of $ .o5in Italian lire. The geographical distribution of purchases under the Loanwas as fol1ows:
Country Value of Purchases(in thousands, U.S.$ equivalent)
united States 9,823Canada 51 7Germany 819Switzerland 319Mexico' 1.269Italy '48
Total 12 825
6. Payments of interest and commitment charge have been made as due.To Hei t-he PnrrmrPes have nno. heen requested to fdeliver n anyr bnd to the
Bank, as provided in Article V of the Loan Agreement.,
. - 3 -.
TIT THE RQRRQJM¶S
Nacional Finangiera
7. Nacional Financiera is a corporation established in 1934 to financethe Aev%lo^nman+.t .. a.-.. -.Mg%ry,i .Jr T 9-7 h O of.th Mexican
Congress, it was designated the sole agency for negotiating external loanson libealfb Af' t*h I.nq4 ,
_~~~~~~~~~'l-..* -^ _ V 'I. ._w4 1 f lLtA V
8. -, *S.e hal of Fir.a is eapta so of 'nO.-VS.lli. pesoe, llypaid, must by law be owned and retained by t'he Government. The remaindar
.. be sold to J-,4va+e V ivest0r8L atu a .tV. 0s.q;U a sub8tantial Par
of it is held by Government agencies, It is provided, however, that thej.'i ~va..ei.,y, stock Lh u hava a Iujur.L.U*y S-epnEnAUIon Uon bLe BDUoru Vf
Directors. Additional funds for investment in Mexican industry are obtainedchiefly by the sale of Financiera!s own bonds in Mexico and by externalborrowing.
Comision Federal de Electricidad
9,. Comision Federal de Electricidad is a government agency establishedin '937 for t'he purpose oI organizing and directing, on a non-profit basiis,a national system for the generation, transmission and,distribution of.electrical energy,. The Minister of Economy presides over its Board ofDirectors, to which the chief executive officer, the Director:--General, isresponsible..
10. CFE derives funds for investment in construction from the followingprincipal sources:
{a) The proceeds of a 10% Federal tax on electricityconsumption;
(b) Federal budgetary appropriations;
(c) Profits on the sale of power;
(d) Borrowing, both external and internal.
11. CFE's policy has been to supplement where necessary the power facil-ities provided by,existing power companies. Thus,.in urban areas, CFEnormally.confines its assistance to the construction and operation of gen-erating plants, selling their output,at wholesale for distribution throughexisting networks, In rural'areas, where there has hitherto been no organ-ized.provision of electric po.wr, CFE may.have to construct and to operatefacilitie,s for distribution as well as generation.
IV..- THE FROJECT
12. At the end of 1948, Mexico's total installed capacity for the genr
eration nf ol + rIf ecrc o1e amAfnn±nd to aboiit. 1 m11i n kw n1f whi ph flFEtcI
plants accounted for about 100,000 kw. With the aid of the Loan, CFE- il . QAA oven r +e ----- n+4.1A +0 i -i *c d the'.,. endI of l9'52The hexlight'program (see Part Two of this report). will add a further
I. l1 co A n 1 * … P-J j.LgUe. I-~nL OAIII1-i1. . ~.~L~Lyr~~4.
VJo "vv Inr ; wzLe sa,.'e peri %A
'3. T,^.e Loa -ro-jectlw falils under Ile following mair. head,gs,rQ
(a) lv'iig-uel Alma a,yt - Il"ai is a large hydroelect-i7--development intended to supplement the power suppliedby iMexligAt to the Mriexico City area. When the Loanwas granted, a two-unit station of 56,ooo kw. atIx apantongo was the only part, of this sy5steem inoperation. 'With the help of the Loan, new stationsat Santa BarDara ( units), San Bartolo (1 unit)jand El Durazno (2 units) will be completed, and athird unit will be added,at -xtapantongo, so tnht thecapacity of the systqm will be increased by about18,o000 Mw. A transmission line is being constructedto carry the power to the El Alano te,rminal in M1exicoCity, vrhere a new substation is being built. At thispoint the power will be fed into the M4exlight distri-bution system.
(b) Puebla-Veracruz System - Three hydroelectric plants,of total ca'acity 35',000 Tiw,, are being constructedat Tepazolco, EIinas and El Encanto re,spectively. Thepower produced will be distributed mainly through sub-sidiaries Qf the American and Foreign Pover Qompany,The area served is the center of the Tlexican textileindustry. Mining and the manufacture of pulp, paperand cement are also important.
(c) Sonora System - CFE is constructinz steam Dlants atGuaynias '(25,500 kw.) and Ciudad Obregon (15,000 kVw.) inorder to supplement the power supplied by the Emnpresade Servicios Publicos, an American owned company whichCFE may purchase in the near future. Irrigation pump-ing provides a major use for electric power in thisimportant aericultural area.
(d) Juarez Svstem r A second 15.000 kw steam nlant is be-ing com"pleted at Juarez, the center of an agriculturalarea which hitherto has had to import Dovier from E'Paso, Texas.
(.e) Bombana System - A hydroeIectric plant of 2,600 kwTis
of the State of Chiapas, hitherto'supplied by a fewC4e,fl. plr. nly. Tn ti raas,irgto
pumping is important.
(f) Torreon-Chihuahua-Aldama System - The project in itsu; v gtat _.vx-lutp wJXV M ut:U. qLw vs- FaJs a +G 41t;VV L; a us
at Gomez Palacio and Aldama. It was later decided(see paragraph 22) that the needs of-,this importantmining area could be better served by constructinga steam station of three 15,000- k, units at Chihuahua.The output of this station would supplement that ofthe plants (Qapacity 51,000 kw,) of the American andForeign Power Company subsidiaries which serve thisarea, IMore recently, it has been decided for the pres-ent to limit the new station to two I$g000 kW..units(see paragraph 23).
(g) Rural Electrification - Small diese. electric stationsare being installed in nine outlying communities,hitherto largely without reliable sources of electricpower, in order to provide them with power for irriga-tion pumping, small industrial enterprises, and domes-tic use.
(h) Miscellaneous Projects -r Chief of these are the con-struction of di'esel generating stations at the importantfishing port of Carmen, (State of Campeche) and thePacific port and resort of Acapulco.. The five dieselunits at Acapulco are mobile, and can be used elsewherewhen a more permanent solution of the powTer problem ofthe area is reached,
This section alsp inoludes five other small dieselinstallations- and additions to distribution facilitiesin a number of towns.
(i) Equipment for Private Companies CFE is assistingthree sm..a11 privafe t om.p n 'ts, Jn the tRtptpc of TLwPer
California, Chihuahua and Veracruz, respectively, toexpa.nd their generating nnd distrShuving vanar itlr neof these companies, serving Tuxpan, Veracruz, hap re-cently been . lho.. y anqunreA Cy GFE.
V. CHANGES IN THE PROJECT
Llt. ̂.sanyx ext-ensivea constrcztYio-.n mrna nm. is ca-r-ored oitj it, i s nati-ral
to expect revisions of preliminary plans .nd estiviates which-will call formin.or am.-endntms of te o rig lgst iav gooods ar.d dec-i-t-on of the
project, In the case of the present Loan, however, the degree of revi-sion vWhich has proved neceasary has been greater tha, is normally to beexpected, and it is clear that.the preliminary plans and estimates putforward by CFE during the loan negotiations were more tentative than the
Bank believed at the time.
15. The Bank first became aware.of this fact when, in Mlay 191t9, lessthan five months after the granting oi thn Loan, CFE submitted a neW L'ast
-6-
of r GoAs, 4the net effect of which .vrv. to reduW from 6;. O57l 00 +o e;77 ilr0VI %.Jo'.A. LI, Jk ; J..L IJ '.J Vii4.& LA VV0 U' uuc .. LSL i.J4.JU q?, LJI ,'J'J\J q~',z* I .9-J"-I
the amount provided for the Rural Electrification project in order to meetnet- increase;: of estib-iattes totoal-ing J220s0 n other parlts of theprogramt,
16. The Bank was disturbed to learn that a substantial part of thesenet increases was to be ascribed to omissions in the earlier estimates(e,g, an omission of Pl.2 million in the estimates for the Sonora proj-ect) and by the implication that the Rural-iElectrification project, whichthe Bank had understood to be an integral and important part of CFE'sprogram, was to be regarded as a safety margin to absorb changes in therest of the program. The Bank therefore decided that, before the re-vised Li'st of Goods could be adopted as a firm basis.for disbursements,its engineering staff ought to review afresh CFE's plans and estimates.
17. Rank.engineers visited Il.exico for this purpose in August 19h9. Thei1rreport showed that the projects could be divided into three groups:
(a) Those on which work. was far advanced, and plans andestimates could be considered firm, These accountedfor about p5.8 million of the Loan.
(b) Those for which some orders had been placed, and forwhich estimates could to that extent be consideredfirm, The firm estimates in this category amountedto $8.3 million, leaving a further '.5.6 million liableto revision.
(C) Those in the preliminary planning stage, for.which $1.4million had been allotted in the revised List of Goods.
18. Since only about lL million out of the-92b.1 million Loan couldtherefore be linked with firm plans and estimates, there was clearly ardanger that fiirfhPr shbstnntipl innrRpses of estimates might cGonfront the
Bank with the alternatives of increasing the Loan on the one hand or, onthe other. of seeing projects susnended for lack of financing The factthat the CFE was at that time experiencing considerable difficulty (seeSection VIII belowv) -in seCiir1ng adeqinate peso finanr.ing for the projectserved to emphasize the latter alternative.
19. In order to ensure that projects, once begun, would be carried tocompletionp the Rank deGided that it. wmld approve the reiiied Lis.t nfGoods only insofar as it related to firm estimates, and that approval ofother ite.Pn wmAould be given only w.hen, and to the eytent thn+t firm estim.ateswere received1 and the Bank was satisfied that no circumstances were likelyto arse wwhich w^-ould m+ake if+ inadvisable for CF +io qproceed ler: th. th ef
tion of the projects or portions thereof in question,
20. Since October 1949` when this procedure was first adopted, the Bank,,in agreeme.;1 .iith CFE, has continued to base disbursements on the sameilprinciple. From time to time, as estimates have been made firm, it hasbeue pUossble to transfer itemis to the -appro-ved- Qategory and, at thetime of the 'Last major revision of the List of Goods on these lines (May 1.951),
only .l.7 million of the Loan related to items yet to be approved,, Inaddition, there remained an unallocated margin of about $300,000 designedto provide for contingencies.w This amount was subsequently increased to,1.8 million as the result of the elimination of the third unit from theChihuahua project (see paragraph 24 below).
21. The chief changes in the project that have been made since the Loanwas granted are reviewed in the following paragraphs,.
22, In the original project.,.the needs of the Torreon,.Chihuahua area wereto be met by installing an additional generator at Gomez Palacio and a newplant at Aldama. CFE decided shortly after the Loan was granted tha.t theproblem could be better solved by installing a single new plant of three15.000 kw units at Chihuahua. and the Bank agreed to this course.
23. Tn April 1951. when two of the above units had already been installedat Chihuahua, and installation Qf the third was beginning, CFE representedto the Bank that there was an ureent shortage of power at the importantindustrial center of Monterrey, for which no provision had been made in theBank-financed nrogram. CFE had already ordered two new units for Monterrevybut was of the opinion that the povwer shortage could be alleviated moreranidlv by transferring the third Chihuahua unit to Monterrev than bv await-ing delivery of the first of these, CFE contended that the third unit wouldnot be hneded at fhihniahiia for snm. 18 months (hy whinh time it onuil hpreplaced), and asked the Bank to permit its transfer to ronterrey on condli-tion that it was subseque.nJtly replace .athi hiuahiiu hy nne of the new-rlyordered Monterrey units, The Bank agreed that there was no pressing needlfor a third un.it a+ Chihuah.ua, but wJas un.ab'e to satisfy itselft~b~ te11iclon the timing and amount. of the contribution the unit could make to thevIolverrv. A p o_J JJA-v4r supply A A 1LAV a +J. V.L 4- L e Wr *'A.A A IA+
and arrangements for their provision had not yet been worked out betweenCVEZ anAd the local po-er comupan-y,
4u. Noti wishing to preventi UCE fr-om aking tLIhe 4ranser on "is -ovn. res-_ponsibility, the Bank decided to divest the third Chihuahua unit of as,socia-
JtiVUk V fi I fl1tA .arin J.U VVAIQCv*14 M,Y CU VY.LVIL UJV rr " UL .A.. .U 7p;, -
that reference to the third Chihuahua ui4t should be removed from the Des-cription of the Project, and that WI e third of t,, amount provided for tJeChihuahua station in the L4st of Goods should be transferred to the "Unppeci-fied': category oT the 1su for later allocation.
2.,5 The amount allotted to the Rur4a Electrification project has aito-gether had to be reduced from 83,257,000,..as originally provided, toD*589,O00, in order to.meet increases of estimates on otner projects. Theprogram now covers nine towns only, as compared with the 23 originallyincluded. CFE has,. however,, agreed with the Bank tnat .this rural electr:L-fication program should not be subject to further reduction.
26.. The amount provided for Mliscellaneois Projects, after undergoing reduc-tions,. was subsequently. increased from the original.figure.of s:;626p703 tolt,2h8,089. Whi4e the diasel station extensions -at Oaxaca and La Paz or.:gi-nally included have been el#ninated, new diesel pLantp at Ciudad del C' men,Acapulqo, Santiago Ix=uiintla and Tecorman Zone have been added.
v i. rrLUnflwnO ur ±nz rru<Jnfi±
27. Several of CFE's projects have now been completed, and are, or soonwill be, in operation. Among these are the fo1loQwin1g -ydroelectric plants:Santa Barbara (67,575 kw), Minas (l14,400 kw), El Encanto (10,000 kv),Bombana (2,600 kw)) and tne iollowing thermo-electric plants: Csudad Juarez(15,000 kw), C4.udad Obregon (15,000 kw). Some of these stations were begunbefore the Loan was granted, so that their foreign exchange cost nas beenfinanced by the Bank in part only. A diesel electric plant at Acapulco,.and six others in the rural electrification program, are in operatlon.. TCheEl Alamo receiving station at the Mexico City terminal of the Iiguel Alernansystem, and several transmission lines have been completed..
28. In 1949 and l950, construction proceeded much more slowly than wasexpected vwhen the Loan was granted, and a correspondingly accelerated ratehas therefore to be maintained this year and next if the program is to beoompleted in 1952.. At present it appears that it may not be possible tocomplete the San Bartolo hydroelectric station and the river diversions i.nthe .iiguel Aleman system by the end of T952. If no unforeseen difficultyarises however, the rest of the program should be completed on schedule.
29, The chief reason for the slow progress during the first half of theconstruction period was a shortage of pesos experienced by CFE in 1949.This problem is dealt with in Section VIII below, A further reason is thefact, referred to above, that much of the planning was at a preliminaryand tentative stage when the Loan was granted, so that much detailed engi-neering work has had to be done on some of the nroiects before orders couldbe placed and construction begun.
30. Furthermore, the present constructiorn program goes far beyond anythingprevioun1v iinedertik0ren hyv (FE'j whi-h ridid not. heagi n activern oeratinnonsuil
1937, and has imposed a severe strain on its planning and administrativestaff, GFE has aeen confronted with the probleA;lms of undertaking major con-struction projects of a kind of which it had little previous experience,of reptr-iitino' aidditional GomnPtent tGivil and P'letrinnI oninieers in acountry where they are not yet plentiful, and of devising an appropriateoranization for its tenhninnl qtRff_ ProareAp hvas thPrPfnreO ton cwnp
extent been achieved by the method of trial and error. For example, aca:na:l sctior+n in t.he ITapaentorng river dver;sion,; buiTlt at a rcs ofX overo1 million pesos1 had to be abandoned because of alides and replaced by atu.nnel costing about 22mi4io pe sow-P t a r tha+v the study W.A thsubsoil conditions and the cost compariaons leading to the design of the
cr.a' rJere Xnadeq , ard nna +1-+ + 1- -- resid-e+ enginee A4A did n -o p -P-4-i
attention to the progress and quality of the work. Moreqver, the contractorsi.. the p ticular section appear to pave had great difficulty in assemblithe organization and equipment appropriate to such a task,
31. In other cases,,. there has been imperfect coordination between differ.-ent phases of the same project; sometimes due to tne generai interruptionof work in 1902 as a result -of the shortage of pesos, but more often toinadequate planning, zt Ei Durazno and Tepazoico, penstocks were delivered
9~ 9
mariy montuhs before thiley orere needuedu.,.Ato l,iLnas, thi'e generating p'lanI-1 nascompleted more than six months before the transmission line necessa-y toU.L.Z .-L L±U~ 4A!I~ UU.4ILi -O.L ao ed b Ul~L filI '.L11Ut . .L41V U±Vlfit;Ult LL U±_LVtob~ UJT.
expensive equipment for long periods.. have cost CFE very substantial sumsIn in lterevt payments or 'Lss of operatLng revenues.a.
32,. The management of CFE has been fully aware of these problems. and hasshown readiness to improve organization in the light of experience. A majorstep fornvard was the creation early in 1950 of the post of Chief Engineer,who is to take charge of the planning, coordination and supervision of a:Llconstruction,. Unfortunately, -the first holder of this post resigned aftera few months. A successor has been appointed, but it will take him somemonths to become sufficiently familiar with operations to make his in-fluence felt.
33. This period of growing pains, inevitable in any large new organiza--tion, should now be drawing to a close. The delays and losses of this.phase should be regarded as the necessary cost of acquiring experience,.
3h. The Bank's supervision of the progress of the project under this,.as under other loans, is based on the receipt from the borrower, as soonas possible after the loa.n is made, of detailed basic descriptions ofthe project, and thereafter of periodic progress reports. This documenta-tiQn is supplemented by field visits of Bank engineers and accountants.The strain mentioned above, placed by the magnitude of the constructionprogram on CFE's administrative and technical staff was reflected in thefacts that many months elapsed before all the basic project descriptionswere received,.and that.it was not until the spring of 1950 that the flowof progress repQrts and their content became entirely satisfactory,. Inadvising CFE of the importance of these reports, Bank representatives havelaid stress on the fact that the information required was of a kind whichmras essential to CEP's management in the interests of its own efficientcontrol of operations. Experience has led CFE to endorse this point ofview stronelv. and to attach great value to the internal renorting systemwhich has in consequence been set up,.
VTT, RPFEWTS OF TE TLQFAN
35... In Mexico, rapidly increasing population, combined with a remarkablegrow!th o^f industry ir. recent years, create an urgent demand fqr more power,The need isall the more acute because of the lack of new constructionduring the depression of t thirts and during the w ar,.
among the worldls o4l producers, increasihg domestic consumnption in recentcs> LLQ *1a DZ iUU 1%. = J0A4IVW+l WJLA v4LD 111Q4. 6L1 O.V>±..LOUJ. .IJ. A.VI. U*Pp v ± * 1
development.of hydroelectric facilities, which figures prominently in theLoan project, is therefore the most logical and euon,unical si-ut-ion ofthe power problem, although the uncertainties of rainfall make i; impossibleto dispense witrh a certain proportio¶-n ol thermo-electric plantts
- 10
37. Since the Loan was granted, CFE;s generating capacity nas roughlydoubled, increasing.from about 100,000 kv to more than 200,000 kw, Thisexpansion means an increase of about 10% in M'exico's total installed cap-acity,.
38. Of the individual projects completed, the Santa Barbara hydroelec-tric station in the Miguel Aleman system is most important, It shouldmaterially relieve the-shortage of power which has handicapped the growthof indcustry- in the Federal District, Mexico's most important industrialarea.
39. Some of the smaller projects, however, are of great significancefor the areas they serve.. The rural electrificatiQn projects, for example,have in some cases brought electric power to areas where it was previouslyvirtually unknown, and have thus made a striking contribution in terms ofboth productive efficiency and amenity. It must be remembered in this con-nection that the importance of irrigation pumping in many parts of Mlfexicomakes power significant in rural as well as in industrial areas.
VIII. FINANCIAL POSITION OF CFE
h0. As its constructional activities pass their peak. >a d operatingrevenues grow, CFE should eventually become financially self-supporting.For the present, however, its revenue from plants in operation and fromthe 10% tax imposed for CFE's benefit on consumerst electricity billsin Mexico must be sunnlemented by governmental annronriations if it iS tocarry out extemsive construction which brings no immediate return,
Ll, Soon after the Loan was made, CFE realized that its appropriationfor 19hi9 wmas insufficieon.t to main-tain the pla=ned rate of eonc+.r'+tion.The most peso-consuming part of the loan program is the diversion of threerivers in orear t.n provide the Mtiguel Aler.an hydroelectrie rstem wi+hsufficient water for maximum efficiency, and work on these river diver-sions had to be sunpend.ed.earl1 that year.= woirkon other proJects WAralso seriously retarded, so that only $2.6 million of the Bank Loan wasactiually withdrawn during7 19)i9 instead oef the $8 million thAt had beencontemplated. at the begilining of the year,
42. The Loan Director visited Mexico at the end of October 1949 to ex-press the%-ank's cor.cern at thinis .sit-ain to Ilr. Be t 1a, the S .of Finance, Mr. Beteta explained that the rigid avoidance of inflationary
-P; n- _4^ mp 4.s anc , ¢ ,^, __|__A_A_ s_. *s-J-ILsE, YV-X~ A4 r V44w 1U4 V A- ss4& vVZ I;+I4IXLUU J.V A r '.L A Q c4 }y V LiijJ8.ii to
made it difficult for him to provide more than 50 million out of the 153million p4U o appropriation wJhich OFE required for 1950, He agr-eeu e-ven-tually, however,.to make available 100 million pesos during that year.The President of the Ban•, -during his visit to;o ivle o in Jan-uiary 1950,further discussed the problem with Mr. Beteta, who was then able to saythat, insofar as CFE was unable to raise funds from other sources, newould make available from,..appropriations the whole of the needed 153million pesos. Later in the.year.,CFE, obtained a loan from the ChemicalBank and Trust of New York.equivalent to 16.9 miU ion pesos, which reducedto 136,1 million pesos the amount to be provided from appropriated funds,
-j
43. The Chemical Bank and Trust loan came within the terms of theconsultation clause'of the Guarantee Agreement and also required theBankis consent under the debt limitation clause of the Loan Agreement(Article VII, Section 7). The Bank offered no objection to thisloan,
Since the beginning of 1950o CFE has experienced no shortageof pesos for construction expenditures. An appropriation of 161million pesos has been made for 1951. This, together with a 100million peso appropriation which the Mexican Treasury is expected tomake for 1952, should enable the construction program to be completedon schedule.,
PART TWO
(a) Loan of -1no,nOnO,OOO to Unainn
Financiera, and CcriaicnFederal de Electricidad (Mexlnghtproject)
(b) Loan of $26,ooo,0oo to The MexicanTI~ 4 .L -U.& -A 'n- UWU4Jd1, 4., -A~I
I. NEGOTIATIONS
T,n F'ebruary 94O, Tvne viexican Lignt and Power Cuompany, Lamited(",gexlight") applied to the Bank for a long-term loan of nearly !2million (this amount wva subSequently increased) to fLiI Jnarce t4he foexchange costs of new electric.power plants and transmi83ion lines tobe constri.cted by thn Company and i ts subpidiWriep in Wexico City andthe surrounding area. The Mexican Government informed the Bank thatit was willing tp guarantee the Loan,
46. On,June 24, 1)49, the Bank !po'oqned Mexlight that it woulq notbe prepared to consider long-term financing until the Companyts capitalstructure had been reorgan4zed so ap to achieve the following purposes;
(a) to enablje any loan from the, Internationa.Bank to ran1 p4ri passu with the otherbonded debt of the Company and its sub'-sidiaLries;-
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(b) to ensure adequlate ceverage of thA Clompanytsfixed charges; and
(c) to establish a capital and debt structurewh.ch, 1WrOU11d facil.Litate -n .d"S'' th CmJ r ac
to types of financing it might require in.LK- J. V,
4" Ija+UeU ,L1~U AiJproJviUZU W1ilr.Lt 1V1WA4J_.j11IW VVViLLJ. U,1JUJV. IJXV V S~4.L' W-
The ~ th fu+ure. - ,a4AA -
a financial reorganization on these lines by the end or 1949, it wouldglve syU-llrpathetlo UoUnideratiorn to an interim loan., to be m,,ade throughthe medium of Mexican Government agencies, to enable the constructionprogram uo proceeed while the reorganization WdS in progr8 -u
47. On July 28, 1948, the Company's Board passed a resolution of in-tention to carry out such a reorganization by December 31, 1949. TheBank accordingly opened negotiations as a result of whicn, on January6, 1949, an interim loan of $10 million, maturing on December 31, 1949,was granted to Financiera and CFE to be re-lent to Mexlight. At thesame time, the Bank informed Mexlight that it would be willing to nego-tiate a long-term loan in the approximate amount of $26 million for thepurpose of refunding the short-term loan and financing further foreignexchange expenditures of its construction program, provided that thereorganization was satisfactorily completed during 1949, and that, inthe opinion of the Bank, other relevant conditions, including electricpower rates (see paragraph 76), at the time warranted the making ofsuch a loan.
48, It proved impossible to complete the reorganization by the endof 1949, and the Bank agreed, on December 1, 1949, to postpone thematurity of the short-term loan until July 1, 1950. :.The reorganizationwas completed by April 12, 1950 and the Bank, being satisfied that otherrelevant conditions were fulfilled, granted a long-term loan of $26million to HIexlight on April 28. 1950.
II, THE LOAN
h9. The long-term Loan is for a term of 25 years and carries interest(including commission) at the rate of 4-1/2% per annum, Amortization paly-ments, calculated to retire the Loan by maturity, will begin on August 1.1953. The Closing Date is June 30, 1953.
50. The Loan became effective on June 30, 1950, and the amount of$5,52.7h1 then outstanding under the short-term loan was charged to thenew Loan Account on that day.
51. Disbursements on both.loans through September 30, 1951 amounted tosomke $1L6 million- Some A12.6 million was disbihrsed in UTS. dollars,and the balance, equivalent to $2 million, in Canadian and Europeancurrenoe e-s
The geographical distribution of purchases was as follows:
Country Value of Purchases(in thousands, US.$ equivalent)
United States 0l,1460Canada 83LUnited Kingdom 629Belgium 380Switzerland 85Sweden 115Italy 99France 26Germany 950M1exico 976
Total 14,551
52. The Bank has received bonds from the Borrower in the amounts ofUnited Staltes $1.1,746,0oo and Canadian $ 300,000.
53. Payments of i.nterest and commitment charge have been made as due.
TTT. THE qnlMRflVFRw
54.. The mexican Light and Pover Company, Limited, originally organizedin I1902, is a oman.ntnopael by Te++erS -aten+ und-r 4the Gompanies 4 -
Act of Canada. Its securities are videly distributed in both M>orth Americaand >-rope,~-4 as - - - Ac by the fact- thas its B'4 oardA Qf DPr reclors 1c-le~~**~ JJ~~* ~ ~V ~~ LJy U±l .LQ U VL~~. V L LJd..LU yJ. ~JJ.I Ui tJ. I cLe
Mexican, U. S,, Canadian, British and Belgian members.
55. Mexlight and its wholly-ovmed subsidiaries serve a population ofmore than 3 million in the Federal Dlstrict (whleh includes M tlexlco City)and parts of adjacent states,
56. Until the opening of CFE t s Ixtapantongo station, 17exlight generated,as viell s distriuted? pustant-aly a;1 vh e,ectri po-rer -ued ' *hi
area, 1lexlight will continue to be entirely responsible for distribution,.supplementing its o-w- outup-uta by purchasirig that of CFE;s Miguel Alemansystem..
IV, THE Pj-R. . -,
57, The Project comprises the constructiQn and installation of hydro-and thermo-electric generating plants, transmission lines, substations
1/ For further intofrnation see M,exlight s Annual -Report for 1950, an-nexed to this Repoitt,
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and otner distrioution equipment needed, in conjunction witn CFrE's TvliguelAleman projects, to enable the supply of power in the Mexico City areato keep pace with-the growth of demand over the next three or four yearspIt involves the addition of 152.,o0o kw to Mlexlight's previous installedcapacity of 275F0000 m,
58. The construction program falls under the following main headings:
(a) The installation of a tenth unit of 16,000 kw atthe existing Necaxa hydroelectric station.
(b) The installation of a third urit of .,ho00 kw atthe existing Lerma hydroelectric station,
(c) The oonstruction of new three-unit hydroelectricplant of 45,6o0 kw at'patla, downstream from Necaxa..
(d) The const-ruction of a new 66.ooo kw thermo--electricplant at Lecheria. This plant is particularly im-portant in view of the present DreDonderance ofhydroelectric power in the mexico City area, and itshould reduce the vulnerability of the area to drought.
(e) The construction of various transmission lines, mostimportant of which is a new double-circuit 220 kv lineconnecting Nee\paxa with the Federal District. 85 milesaway,
(f) The provision of extensive distribution facilities,
and meters.
V. .r~ .U . (J2 . 'J..
59. No substantial change in the Loan Project has been made since theLoan, was grantpdo As~ utscQUbe ir'= L ecio QV% belvfA 4vreer +heWV Bank w
has expressed its conditional willingne-s to give favorable consideratiornto the expansion of the Loan PrQject, wvi-ithout increasing th,1e &,moLint of theLoan, to include certain construction projects which Mexlight has beencarrying qu-u in addition -uo tIhe na 4-finiLue program,
OU. The cn.ei anenget5wiliuL1 Tv. cuurbt 2L UU a ,u C WVLVL4JU £-S4U-UJ .L1
Schedule I (Description cf the Project) to the Loan Agreement would be asfollows:
(a) The provision of a portion of the spare parts re-qui,ed for the maintenance and repair of existinghydroelectriq equipment would cover the period from1949 to 1952, instead of frora 1949 to 1951.
(b) Instead of 190;000 watt hour meters. 242.000would be included.
(c) A new item, "Increases in Capacity of VariousSubstations,n Itould be added.
VI, PROGRESS OF THE PROJECT
61. C1 on st4,ractiVon h,as prvoceeded without ertrWso inoep th ganin
of the interim loan on January 6, 1949, although there was a temporaryslowing down during the period of n.egotat-on of the 1ong,tenn loan inlate 1949 and early 1950. The present construction schedule providesfor the completion ol all projects by the end of 1952, a goal -which ap-pears to be technically feasible. A failure to solve the cash problem(see Section 1A below) and delivery delay ar?e tle unly fuautrs likely
to prevent its attainment.
62. Mexlight has an experienced apd competent engineering staff andthe construction program has been planned and executed in a satisfactoryway. Progress on the major items of the program may be sunmmarized asfollows:
(a) The installation of a tenth generating unit, of16,000 kw capacity, at the existing Necaxa hydro-electric plant, was completed last year, and theunit is now in operation.
(b) The installation of a third generating unit of2h4boo kw capacity, at the existing Lerma hydro-electric station, was completed last year, and theunit is now in operation.
(c) The civil engineering work on the new 45,600 kwhydroelectric station to be built at Patla isunderway. Construction of the powerhouse andtransmission line is about to begin,and the proj-ect is due to be completed before the end of1952.
(d) Good progress has been made on the new 66,000 kwLecheria steam plant, which should be qompletedearly next year.
(e) The new 85-mile double circuit transmissionline from Necaxa to IVexico City is due for com-pletion next year.7
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U63. E_arly n11 i951 .th prmU1ptU Uel-vU-y of t4L±upIitLL, toU 4.f
U. S. suppliers was hindered by difficulty in obtaining the assignment bythe ivMexican authorities o£ sufficient railroad freight cars. The Bankrepresented to Nacional Financiera, the enbibrrrarsing situr:ticrwhich might result vis-a-vis the u.S. defense authorities if,. vwhen theBank had pressed them to release strategically important materials forurgent use in Mexico, the Mexican authorities apparently assigned a iowpriority to their transportation. Nacional Financiera wan ableto secure the release of sufficient cars.
VII. EFFECTS OF THE LOAN
64.. The completion of the tenth unit at Necaxa and the third unit atLerma, of combined capacity 30,400 kw, means that, taking account also ofCEE's recently completed 67,600 kw Santa Barbara station, the installedcapacity serving the Mexico City area has increased from about 370,000kw to nearly 70,000 kw, i,e. by 27%, since the interim loan was granted..In view of the backloo' of construction which accumulated during the waryears, and the rapid growth of population and industry in the area, thisincrease is no more than is necessary to avert a serious shortage of power..
VIII.- LOCAL PURCHASES.
65, The Bank authorized pIexlight to use up to P;3 million of the lona-term loan for purchases in Mlexico. This $3 million included $300,000allocated for the same purnose out of the short"term loan
66. The nlthorization in the case of the lng-term lnan waq in the formof a letter agreement, dated April 28, 1950, which permitted these pur-
the terms o4 rp,rcha5e shall be more Cvrnble thar,the terms.offered by other prcspective suppliers outsideof +4Y n+ ".k wirgtken in such compariaon ofMexican import and similar duties imposed pursuant tolegisLati6n or regulaiLon adoptqd after the date ofthis letter."
67. When the Loan was granted, the bturden of T.rexican import duties on
trical Indqstry permitted p4blic uti'ities to import free of duty alleqWipmenlt and u mauerials requsIued 4o.v v± their sy.Utxup providueuthat they were not-manufactured in-,,e4ico. in the.requisite quantity andqu ality. In July i,9507 t"e Plexi(arl Governlent in1troduced a system of imlport licensing for electrical goods, and in January 1951, goods of thekind manufactured by Induptria 4lectrica de Mexico, S,A., the principailMexican manufacturer of such goods, were subjected to very substantialincreases of import duty, in cases where Mexican manufacturers could
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not produce goods of the type or in the quantity required, or make deliveryin time, it was possible to obtain an import license and exemption fromduty.
68. At the time when these new duties were imposed, Mexlight was con-sidering the purchase of 825 distribution transformers required for theloan projeet. Industria Electrica quoted a price of $868,000. A Belgianfirm quoted t6270ooo c.if. Mexico City for comparable equipment anddelivery date; Inport duty at the old rate would have raised the cost ofthe Belgian goods to $670,000, but the new rate would have raised the cootto $918,000.
69. Mexlipht nroceeded on thA assuimption that an annlination for animport license and exemption from duty would be refused, since IndustriaPlectrica -was nhle to meet the order in terms nf quantity.y, qunlity antidelivery, and placed the order with Industria EleQtrica. When the Bankwas infArnme of' the irctan it- hriq no eehetoin, 1'biut.r, VtIIM 1 h.t tfhecondition quoted in paragraph 66 above had not been mpt1 and that thePlrhae wstherfo r^e Ih-, 0e^~ - -14J;l < fm1% o^M+_Ef ^r ̂ ^nA
rJ~¼ 4. _.a.._ * %J.4JULt A4 . .... tI% S , '- F M
The same ruling was later found to be applicable to another purchase fromIndustr4a Electric>., in, he amoung of $85,ooo, w tha+ a tl4-4- of $955,0of the Loan thus became ineligible for withdrawal.
70. The financial implications of this ruling for fMexlight, and the ac-+ior.proposed by the Dank to ,ini.ize them, are described in Part FoM-- - wluw
71J4 lT:: B4ank r.ayV r.t, itVs1eJ.f LUU4-j1 boIz-tO ebnjdlu i p;O-cee(J In
any particular member country. It is correspondingly reluctant to financepurchas, ruade in a ~articular pountry if it appears that such purcnasescould have been made elsewhere on better terms in the absence of someregulato,ry action, such as the imposition oI import duties, on the partof the government of the country. It was for this reason that the Bankattached the condition quoted in paragraph 66 above to its local purchaseaithorization. The effect of the new regulations and duties has been toincrease the cost of the projeqt and, by making it impossible to spend Loanproceeds as planned, to create a serious financial problen for Mexlight.The introduction of such duties and regi4aAions, subsequ4ent to the grant-ing of the Loan, without express provision for the exemption of Bank-financed goods, constitutesiin the opinion of the Bank, a serious dis-turbance of the as$umptions 14pon which the Loan,was made..
72. A review of further orders which Yexlight hjap placed, or proposesto place with Industria Electrica, suggests that they are unlikely toraise further problems of this kindo In a number of cases Industria Elec-tricals quotations, while lower than those of U. S. manufacturers, arehigher than the prices prevailing in Europe for'similar equipment. Never-theless, in triese cases the fact that much of Mqxlight's existing equip-ment is standardized on Arerioan patterns would strongly favor the pur.-chase of American types of equipment, as manufactured by Industria Elec-trica, even though there were no import duties on goods purchased inEurope.
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IX. FINANCIAL POSITION OF ASXLIGHT
73. As far as normal operations are concerned, Mexlight is able, on thebasis of a definitive.rate structure awarded by the Mexican authoritiesin December 1949, to.earn a moderate surplus after covering operating ex-penses and financial.charges. Earnings have, however, fallen somewhatbelow the expected level during the last-two years as a result of the ab-normaal reliance on thermal, as. opposed to the cheaper hydroelectric power,necessitated by two very disappointing rainy seasons-
74, At present there is some uncertainty about rates. In M5ay 1950, nego)-tiations for the biennial revision of Mexlight's labor contract were sett:Ledaccording to a formula proposed by the Government.- Wages were to be raisedby 15% but, to the extent-that Mexlight failed during the f'irst year ofthe new contract to-earn the "reasonable rate of return" provided for inthe rate award, the workers were to return the increase during the secondyear.. Thus,.assuming that over both years'of the contract I"Iexlight failedto earn enough to lustify anv increase of wages. the wages paid would theo-retically have varied as follows (denoting ,the original rate of wages aslOo)-:
19L9-nO l950n-51 1,91 -52 195? -5
Ino0: < i'-, i..e.l00 015.' q RE:
Thiq fnrmiiTA ws. nhioisr ii -i4+.ic ip tpe sens +Ata. +-he uorker we-re-- …~~ob-.-. ,~ _ 11 t _- t h er
unlikely to accept-such downward revislons'if called upon to do so, andIt apnpeared mo.re…prbbQthn..rompr.to wre to 4fx-h ^vulhave to take the form of increased power rates,
75.. -.The Tariff' Commissiqn hap for some time been studying Mexlight'sfnr.&-.^il ~ ~ rww w to /e;,ere.d pil015. 4.A'-O'es 4J.uls, ac-
cording to Mexqight, show no retrn.zi n eXcess of the standard rate to 3us-.t4iy ar-.of the .1uo va-ge increase paid during that year. The announcementof a decision based on this study has so far been delayed.
76. The Bank is particularly concerned that the Mexican authorities main-tain the principe of v r-Esonable rate of retrn, on -w-hich tPhe definitiverate structure was based Onoe pf its conditions for financing Mexlight'sprQgram wap thaT the Company secure ;from the mex4can.autnhorities ratesadequate -to provide a satisfactory earping baais for the Company, and thesanK would not have granted the .rInterim loan.paq:it not been r?assured onthis point by a letter which the. Secretary'of Eqonomy had address'§d toNapional Financiera, Ird whIlh con1C;LWd AS r.0llow2 s
"....you are authorized to assure said Banking Institution'that the Secretariat of National Economy, in qccor'dancewith the s.tatutory and regulatory. proceduresw iwthin thescope of its legal authority, will dil-igently take allnecessarya teps in order that rates applicable to said.Company and its subsidiaries will all9w them said reasonsable rezurn.11
- 19 -
Furthermlore, the Bank m,ale Ile grar.tnrg of an adequaate def-'tie'at£ U.l W1I~IU~I.l D JIIA 1~U~ L'l1i ILVA±LL. J ~L %4 LI "1.VJ.V~ ~'V
structure one of its conditions for granting a long-term 'loan.
77,' According to the terms of the rate award, payment of a tax at the!rate of -% annually on the value of Mexlightls properties other 'han per-manent.hydraulic works is not required insofar as earnings fall below th.estandard rate. This has a cushioning effect which, for the time being,should partiqlly.offset the effect of the uncompensated wage increase onearnings and cash resources.
78, The above-mentioned factors, together with rising peso constructioncosts, have caused Mlexlight to experience increasing difficulty in find-ing sufficient liquid resources for investment in its Current major oon-struction program to supplement the U4 million peso loan made by NacionalFinanciera, concurrent;y with the Bank Lpan. This is, Qf course, despitethe fact that dividends may not be paid 4nd sinking funds will not beginuntil the end of.the construction period,
79, When the Loan was made, it wap already forqseen that cash marginsover the construction period would be uncomforta.bly thin, and that anactual cash deficiency of $165,0C0 was likely at the.end.of 1952. Revisedestimates made in June this year showed, however, that.the cash deficiencyat the end of 1952 was likely to be of the order of $? million.: There-after, satisfactory cash margins would prevail, since the constructionprogram would be completed. Of the $2 million, $955,000, or nearly half.,would-be due to the fact that purchases to that amount had been ruled bythe Bank as ineligible for its financing (pee Seption VII; above).
80. To help to remedy this situation,. Mexlight has requested the Bankto agree:
(ta tn restore thA diqallcwed AQ$5jOOn to the T.oan hv
substituting for the rejected items an equivalentamou-.nt o.f dlrq4mt+.-erincurred.subsequent to the Effective Date of theToan, or to be iniUrr0cd hpfore the end of 1952jon account of projects hitherto outside the Bank-
penditures for an equivalent amount of Qxpendi-tureshihet schedulled~ to be made-o_u+. o ~ f +Yheproceeds of the Bank Loan in 1953.
81. This procedure is designed to make it possible to vwithdraw as muchas posSi ' ]Ji Ve of 4the- LoT- J4 l --e endL I.752, n a.n ... .b.y . he
$955,000 which otherwise could not have been withdrawn at a11, and partlyby~ ~~ r..ki. ayi -abeii15 4n ---2 ----- A-wed w-wh woulA not- o-4e-1LY L11a±IM.LLI, _VL~ Lil J,7n1e. andU J17)_54 4.UCLU P1YVUQ V4.& LIVUA.U IIUI.' ULIIC:L-
wise have been available until 1953. In this way, the end,-l952 cash posi--tion would be improved by nearly- $1s500,000 w4utlout arny red-Uction of themargins in 1953 and subsequent years,
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82. This would not be enough, however, to solve the problem complete'ly.A further $1 milliqn wouad still be necessary to close the 1952 gap- andto provide, in addition, a minimum working balance of.about $500,000 Fo-rthis reason, and realizing that the full cooperation of the Mexican Gov--ernment was essential to the success of any plan designed to ensure that;the due completion of the project should not be impeded by a shor-ageof cash,, the Bank informed lvlexlight on July 3, 1951, that it was preparedto give favorable consideration to the request for accelerated withdrawaliof the Loan, and the substitution of new items for the disallowed $955,ooo,provided that:
(a) Meclight was able to satisfy the Bank that addition-al financing sufficient to maintain an adequatecaph balance in 1952 and 1953 would be forthcoming;
(b) Nacional Financiera,. S.A..,. as representative of theGuarantor, offered no objection to the proposed.course of action,
On being informed of this decision, Financiera expressed approval of theproposed course of action,, and stated that it was prepared to grant.Mex-light a short term loan of up to 10 million pesos (equal to approximately$1,156,000) in order to enable the Company to fulfil;.condition (a) above.
PART THREE
LTine of Credit of $10 Million in Favor of Consortiumof Commercial Banks and Nacional.Financiera.
I. NrOTLTATI)NS
83.. In JITarch 1950, i4r.. Antonio Carrillo Flores,. Director General ofNaclonal Finanriera, the official L,exican financing agency, informallysbmitted to the Bank a proposal for a credit of about $lO!million tobe ~ applie + +he financ'in of small ani mpreiiuymscale development nroi-ects through the intermediary, and with the participation,.of-privatecoinmmercia1 ba.nks in exi^o..
84,. The pre .+.L r 4 of the Ba"r. n_.- fs 'o-rable for i+t aw inthe proposal not only an opportunity of fruitful and widespread coopera,4t, o a -vvith '1I11xican. pri,v-a4t-e. b ar.4k%i ngan.d enterprises 'but al-so the possibilityof stimulating the interest of Mexican banks in the hitherto relativelyunfairiiar field of developrment credits.
Or' -y' ±L... ~~~~~~~~~~ .4on' - el-4~ 4 n,A-, a 1- ;Ingt n an 6,,A P
85. ILn the course of conversati.J.o h' .I. h an Mexico City
between the Ban1k and Amexican private bankers 4nd government officials,.various mechanisms of operat4on were explored.- The creation o- a nevw
development bank, either private or governmental, was considered unneces-
- ?1 -
sarv.because of the high degree of development of the bankine structurein Mexico and because,.in the shape of Nacional Financiera .theroL1readrv existed an evnerienGae nanrnv for finArtnina industria1 demrelon-
.ment.. Since, however., one of the objects of the operation was to workns f'.r as possible through the normal channels of private enterprise,it was considered inappropriate to rely entirely on Financiera. On theother hand, the Bank wished to be able to deal with a single bodyr wicrh+tcould-relieve it of the meticulous screening of many small projects from
p .int of v J . J.L .~L'J1 4. 1%A W. %". .1. ~.6bJJ.JA..LJ ~ '.%.V J .~
worthiness Qf the applicants.
86. To meet this need, Mexican bankers and government officials proposedVile creation of. aL N'onsox tdunr- consisting ofL eight oL;, 1 p-e: prir.cipall com,.mercial banks in Mexico and Nacional Financiera, the financingagency oI the Mexican Government * The banks participating in the Consortilumare as follows: Banco.Nacional de Mexico, S.A., Banco de Comercio, S.A.,Banco Internacionai, S,A., Banco de Londre5 y Miexico, S.A., Banco Mhexicario.,S.A,,.Banco M,Iercantil de Monterrey, S.A., Banco Industrial de Monterrey,
.S..A. and Banco Comercial ivMexicano, S.A..
.II, THE LINE OF CREDIT
87, On October .18., 1950, the Dank opened a line of credit of $10 millicnin favor of the Consortium, The line of credit is to be used to makeloans to members of the Consortium, who will re-lend the proceeds of theloans to Mexican private enterprises in order to finance the foreign ex-change costs of expansion projects to be carried out by these enterprises.The loans will normally range in amount from $25,ooo to $1 million, andtheir term will nqt in general exceed five years. At least five membersof the Consortium must participate in each loan,.and the maximum partici-pation of any one bank in a single loan is limited to .40%. The Bank willcharge interest on.its loans tQ the members of the Consortium at the rateof 3-1/2% per arnum (including the 1% commiSsion).. The line of creditLoan Agreement is guaranteed by the United Mexican States,
88. A.Supplement No, 1 to the Loan Agreement., providing for.mrinor tech-nical changes, was.signed on January ?6, 1951.
89., Before the line of credit Loan Agreement could become effective,the Bank had. to be satisfied that the Loan and Guarantee ARreements.hadbeen duly authorized or ratified by their signatories., and that.the.Consortium Aereement between the Mexican banks was a valid agreement.Progress in meeting these requirement-s was.slow, and the Bank was notable to declare the Loan Agreement effective-until.July 20;.-1951
90L.. Nacional Firnanciera's authority.to euarantee the line .of:.credit onbehalf of the MeNfican Government was defined in enabling legislationwhich camp into force at the heginnin;g nf this vear.- rerti n questiAnshave arisen in connection with this enabling legislation, as describedin Part Four of this Remort,
- 22 -
TTT Th)ANS GRANTED
91. The following loans have been granted under the line of credit:
(a) August 10, 1951. $73, 550, for Industrias Mabe, S.A.,+o, ~ a ptcha. rshir.e
4for thea mornacf' e o vf ki ttehAr
stoves;
(b) August 10, 1951. $50,000, for Compania Textil deC! A +--,+4I1- -ft 4,"fsi, fPnv.
VJC4tJ0±4UV.la, Se A., wJ Ft," prlq9e +extile &.+; -
the manufacture of fibre bags and packing cloths;
(c) August 17, -1951. $144,500, for Textiles Acozac, S,A.,.to purchase anutomatic loomus for the-,,manu.act4re ocotton-fabrics;
(d) October 4, 1951.. $37,000,.for Compania Textil deNayarit-to pvrchase cotton spinning machinery.
92. The relativ&'inactivity of the line of 'credit has been dizpFuifl.t-ing to the Bank,. which has done'all that it could-in the way of simplifice-tion of procedure to ensure that its own requirements impose no unneces-sary burdens on the:members of the Consortium or the ultimate borrowers.
93. A general-difficulty springs from the fact that coommercial bankloans for industrial development are relatively unfamiliar in Mexico.. 'ore-over, these "creditos refaccionarios! pre regulated by Mexican banking law,which requires, i-nter al)a, that each loan should be secured by a mortgageon the whole property of the borrower., Prospective borrowers may thus bedeterred, not only by the need to give security which may be dispropor-tionate to the amount of the loan, but also by the fact that an expensiveappraisal of the'property must be made,. and approved by the Banking Comr-mission, before a loan can be granted.' A borrower is reluctant to go tothe expense of this appraisal unless he feels reasonably certain to obtaina loan. It is understood, however,. that the-Banking.Commission is preparedto waive the appraisal as far as Consortium-loans-of less than $100,000are concerned.
94, It appears also that the present arrangement, under which the ul-timate borrowerp can insure with the Banco de Mexico against the foreignexchange risk attending only the latter-half of-the maturities of a loanand must themselves assume the risk on the earlier maturities, may tendto cause borrowers to prefer peso loans from which s4ch' risk is absent...
95. Difficulties of this kind can only be nettled by the Consortiumin conjuhction with the Mexican authorities. .The Bank-is anxious thatthev should be resolved without further' delay..
*- 23 -
DADMT ('nTT
Relations Between the Bank and theUnived NIexican S t at e s
I. POLITICAL AND GENERAL
9u6 During the period nurle e-rView, ri.iexico Uh been goverr,ue bu I IC
administration of President Aleman, who came into office in 1946. Pres-ident Aleman's term of office expires at the end OI 52 and a presi-dential election is to be held next July.
97, The notable stability of the Mexican political scene during thisperiod has contributed greatly to economic progress, especially in thefield of development. It has permitted the Bank's staff to work con-stantly with the same mexican officials and to develop close and friend-ly relations with them,
98. Bank representatives visiting Mlexico have always been most hospi-tably received and given the utmost help in conducting their business.Early in 1950, the president of the Bank visited Mexico at the invita-tion of Mr. Ramon Beteta, Secretary of Finance., and discussed problemsof common interest to nexico and the Bank with President Aleman, Mr.Beteta, Mr. Carrillo Flores (Director General of Nacional Financiera),.4r.. Carlos Novoa (Director General of the Banco de M.1exico) and otherleading figures. Ifr. Black also visited the sites of some of the mostimportant projects of CFE and Mexlight.
IT. CONSULTATION NEGATIVE PLEDGE
990 From the time when the Bank made its first loans to Mlexico in January19h9, until October 1950, the chief external source, other than the IBRD,of long-term funds-for Mexican development was the balance of a $50 millionline of credit opened by the Export-Import Bank in favor of Mexico in 1Q47,The Bank was duly notified by Financiera of applications to Eximbank forloans-under this line of credit, but in no case did the Bank have any com-ment to make.
100. Since January 1949 the Mexican.authorities have obtained a seriesof short,term advances, totaling $22.,5 million, from the Bank of America,chiefly for the purpose of financing the neso costs of hiehwav construc-tion. In various discussions with the Mexican authorities, the Bank hasexnressed its doubt of the wisdom of inenurrinn eyternal deht for thispurpose, and of borrowing at short-term for long-term development project,s..Finanuiter hav infdis knd ofe fiank tchn.g th. .eican authorities intend infuture to avoid this kind of financing,
- 24 -
101= The largest of these sank of America loans is one of $15 millionmaturing in 4 years. The underlying security for this loan involved apledge of the proceeds of the TMexican tax on the consumption of gasoline.The Bank agreed to waive its right, deriving from the 'fnegative pledge"clauses of the Guarantee Agreements, to share in this securitvy
102. Tn October 19S0, the E--ort-fnport Bank opneda a line of credit of$150 million in favor of Mlexico. The Bank had not been notified by theIk,exican Governrment tha+ negotatitons for such a line of credit were inprogress, and took the view that the consultation clauses of the GuaranteeAgreements had thus been i" ringed. In the co-se of subsequent conversa-tions, Mexican representatives raised the question whether these clausesw;iere lntended to cover proposals to open $uch lines of credit, as distincfrom specific proposals for loans under such lines of credit. To clari ythe sLu ui I, "e Bark addressed a 'letter to Fnan that iconsidered that the relevant clauses of the Guarantee Agreements covereclboth types of proposal and, in' reply, Financiera expressed its acceptanceof this interpretation. Financiera has notified the Bank of proposals sofar made for the utilization of the $i50 million line of credit~
III. ENABLING LECTISLATION
103. Specific legislation was passed by the Mexican Congress to authorizethe signature of the Guarantee Agreements in the case of the Comision Proj-ect and M!exlight Project Loans. The Bank subsequently discussed withFinanciera the desirability of requesting Congress to enact general enablinglegislation which would enable Financiera to guarantee Bank loans on behalfof the Mexican Government without need for specific reference to Congresson each occasion.
104. Financiera prepared a draft of an appropriate bill which was intro-duced in Congress in December 1950, In the course of its consideration byCongress, however, a number of amendments were introduced l.miting thepowers sought by Financiera in a number of ways, the chief of which arethe following:
(a) the authority given to Financiera is limitedto loans, not exceeding $30 million, contractedbefore October 31, 1951;
(b) loans to private enterprise may not exceed 33%of the $30 million total;
(c) national property or revenues may not be pledgedto secure the loans.
105. This law, which caine into force on December 31, 1950, had implica-tions, not only for future loans, but also for the Consortium line ofcredit; the guarantee of which by Financiera was ratified thereby- Therestriction of loans to private enterprise to 33% of $30 million, i.e.$9.9 million, meant that the full amount of the $10 million line of cred:Lt
could not be utilized, Furtherm6re, although the Consortium Loan Agree-ment set 'June-30. 1952'as the latest date for the-Banka's approval of loansunder the line of credit, the new-law gave Financira no power to guararr-tee-loans after October 31; 1951. Finally; the. prohibition of pledges ofnational prQperty or revenues to secure Bank loans appe'ared possibly to'affectAthe.anplication of the nheatlve nledge-cov.enant of the GuaranteeAgreement,.whereby the Bank was entitled to share in any security whichMexico m ight givA to other creditors
106. After' SeAMring- the opni40n of infenpenAent MAeiaVi nmiin Al theBank informed Frinanciera on March.15, 1951, that its willingness to makethe Consortim Loa A.emen.e-t effective wo1.T-dle'r.d on t~he receipt rf a
letter from Financiera to the effect that;
(a). The M.exican Government would undertake to refrainf,.nw ,.ol.n n1aAt. cc e IAn,,.
4+ Paw orvyr e,,+Ay..n
debt until the Consortium line of credit was.repaid.LiA 4. IA.. 'l-.o U.4LV.LL the n1Abling l.aW UI A VVU -%AS.L.y
amended to recognize-expressly the validity of thersegatiVe p.ledU cover4 --- of - -. -'d 4.r1- puug
Guarantee Agreement, and
(b) Fix.anciera undertook to obtain appropriate amendmentsof the enabling law at the next session oI the MexicanCongress in order to provide-for (i)' the express recog-nition oI the negative pledge covenants, (i) theguarantee of loans made under the Consortium line ofcredit4 from November I, 1951 until june 30, 1952, and(iii) the eventual use of the entire $10 million line
OIf credit,
The Bank further pointed out that it would have to limit its approval toloans totaling not more than $9,9 million-made not later than October 31,1951, unless prior to that datellegislative modifications as in (b) abovshad been duly.made. In a-reply, dated.April 9,'1951, Financiera statedthat'it was authorized by the Mexi9an Government to give the assuranceswhtch the Bank had.requested. A new enabling bill was'introduced in theMexicaz Congrese ip September, but tad.not, been passed by ct-ober 31, T:heBank will therefore be- unable.to grant further loans under the line ofcredit until the.bill is passed.
IV, COMBDNED WORKING PAITX
1070 .At the time of the opening of the $150 million Zximbank line ofcredit in favor of Mexico, referred to above, the Bank was consideringthe scope and purposes of its possible'future lending.to Mexico.in thelight of an economic survey-made by members of its staff iin 'April'- May1950, at the'request'of the Mexican Government. The'granting of a newexternal credit of this magnitude, together with the $15 'million-Bank of.America loan (see paragraph 101), clearly cal4ed for reconsideration ofthe'situation. Pend'ing such reconsideration. the Bank-informed Financiera,in December 1950, as a result of a preliminary request for a further loanto CFE. that for the time beine it could consider financing additional
- 26 -
projects only if the Mexican authorities would undertake not to avail,themselves of an amount of the Export-Import Bankfs line of credit equiv"alent to the amounts of any loans that the International Bank might bewilling to make.
108. . In February 1951, Nacional Financiera proposed the setting up ofa Combined Working Party. consisting of representatives of the Bank andthe Mexican Government, to assess the major long-term trends of theMlexican economy. with Darticular reference to lexico's caDacity to ab-sorb additional foreign investments, -The conclusions of this CombinedWorking Party were not to be regarded as committing either the Bank orthe Mexican Government on matters of policy. The Bank welcomed thisproposal and the first meeting of the Working Partv; consisting of twoMexican and two Bank economists, took place in Washingtpn in April, wherits ter.m..s of referenre 2nd program nf ntmriis were agreed ipon. Siuhse-quent meetings have taken place in Mexico City. The Working Party isexpnected to present its repnrt shor+t2y
109. In a letter dated October 15, l951, M.r. Bet_tainfnrmard the Banrthat the Mexican Government was authorizing CFE to present a number of
the Bank granted loans for these or other projects, Mfexico would not availitseLf of a correspondingamour.t of t+1., d150n izllin line o- --- A,+ it
being understood that this arrangement neither implied that'Mexico'sfurther loans toMexico r t c t wslmitllo fi gr50 mhaiod nor precludedfurther- loans to Miexico after the $150 million figure had been reached,
4:~~~~~~~~~~
44 ~ ~
1. --- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ N~~~~~h S~~~~~~~~~~~~~~~¾ *1 tI~~~~~~~~~~n
I ~~~~PAI
* ., ~~~~~~~~~~~~ 't*~~~~~~~~~~Q ~~~~~'1~~~~~~ ihI~~~~~~~~~~jp~~~~z;ay- '4
I I ' 44ui' -i V1 :y
The Mexican Light and Power Company, LimitedIncorpor-ted under The Componies Act (Conodc)
H E A D O F F I C E: 2 5 K I N G S T R E E T W E S T, T O R O N T 1 I, C A N A DA
MEXi CO C i TY OFFi C E: 2 a. CALL E DE GANT E No. 2 0, ME XI CO, D. F.
0
AND ITS SUBSIDIARIES
TI li:N\IEXC5ANT 1ELECTRN;U LIG(HT (l0AIPANY, LHHTED}.j
CIA. l)E LUZ Y I'FUEi{ZA DE PtACHUIlJCA, S.A.
C IA. .N'EXICANA INItERI)DI0NAiL lIE F UERZA, S.A.
*I 1.. IE FUI:ZA DEL. SliR(tE,TMOTt TiP ?VtEX!(t- A
(IA. lil Luz Y FuERtZ A LI.EICT'I1CA DE ToLUCA. S.A.
CIA. XIENICANA HIDI/OELECTItCA lI DE TIERHENO./, SA.
1:'DIFICIO DE LUZ Y Fu'tiERZA, S.A. 3J [1.. NJ. GUIBARA, S1C. 8(:)1ES, S. EN C.
Directors (CEorIwi I S. - - S i-s -l- I I-'ll- -…-1- - Chi irmn
I'AtA;N ZEELAN -- - - - - - - - - - - - - - J U .
I,. . (IAYD N - - - - - - - - - - - - - - - - i -'ss l
B. 11. Bi NI)NIER AIl.I.AX (GIAYlON, K.(,.
RIKIN(] BIttD/NNS I ).N I I) C. G UN>'IT
I?. ( *. .t vp ( 1. r. 111:XI M
W. i). D)A WiES HEI NIRX . I-St1KI-It
.J. IDNAI.u D.)U;NC,AN SIlI lHE':(NAL.Dt L.EtP'EiR, Kx.-'.:.(:, C .t.E.
JUAN IM'IAI''TINEZ TIl.IEDl.\
0
iitittt/… ItA- - - - - - - - - - - - - - - - AIAMIE L. STiENWARItT
'e"./y :;I -l - - - - - - - - - -- i. .\AIENDEZ AIMENDAtIZ
Trustee forBondholders NATI tINAt, T1USIT (CIPANY, .IMID - - - - - - - - - - I I
TransferAgent NATIONAI. THIiUST COC)IIANY,JiANtI) - - - - - TIN)lNITON) AXI) AUNTI'iEALI
Solicitors Bi1 A NE, AN(I,I.N, OSLER & CASSEI,S… - - - - - - - - - - - -ItONrT
Auditors (,AHKI KSION, ( OI(tVN &C (… -- - - - -.- - - - - - - - -'T()tNT
!I !tŽ, rr\ X1 ,>,''w,,,I,-,,rQr &. C } (- - - - - - - - - - - \ ICO CITY
:W-*Xz~ Ligh an Poe Copn L-rld&
39t,,.. .h A.ua R ...po61rt of th
I U(I GIUl IJIA l.llo.;Clv 016' ,1I .'JL'L' j
7'/1 7'11F Sll IiI;l() LJL)El'S:
Ir ae iioll oi])reeol begs to subsmit its AnnaualR:ep)ort for the vetl 19)50) to-gele gvtl ;oslitedl ]3alanc(e Shleet. of the CJOnlP.IIy attI its suh)si(lialrv
_- (.oIip.4Iinie Q atH9LItfonliaecl'91UH kUtJII.di1 .I t. diiUl I.~ oss.t.tjlillJ I i of )iisIIicl..tVi(
Rlain1ed1 ,SurPlUS anid ,StatemIenIt Of COnSOljIdatedCcI Clelleal RCeerV e.
T he Airnluall P epol 1 of t;he C erreral M!anagter onlt,ainling add (i t;iOl:rI 11ff dnn pl)llI c&ol-cern i rg lhe mera t.ions durinlg the yetr l9.-,( is also apJpendcedl.
PESO RATE OF EXCHANGE
'rihe peso has remalinedi firm at l,he r.tte of *''.ti;) to) the Unlitedl Stales diot:lla att whichit was stablilizedl in 1!k949- as rep)orte(l last year. lhea aeragpe ratte forl the peso dluir ing l')95(,il tel,'111S of' C':triad ialn currl'ency, wa':s 7.9 to th;Ile dollar eomll)arel \\it}l~ tire avera.ge rat.( in 1 94!1
of{ 7'.79 tin, tire oli)1:rlla.
EARNINGS
'tlire corwolidl.tetel net operatt,ing revenute for 1.9;)t, in terms o-f Carad.:iaril curriency,\r \Viit,$!2, Ot)4-(,)98 cor11par1ecl w Mith 1 1 .27 D4,77 in 1')49. 'fi'e rii its ase iri the gross Iar fie g.a of 1) 5()as conlp1led witlh vi'94, amounstintg to B$:i,2c7, ' hct is chiefly attributable to Ithe Cuopa.ny'new r iat;es 'x hit Ii a.s rep)orted lalst yea.!' becatme effee tive ini Decembller 1949) . lowever, asF
s . r .-1 , , - s l r - 4. -.1 D1 -.4 4 - ,I I 1 1. , I , 1, o.
ICSUll, 01 I mc i estrietionswhichl,hadpllU to be In poset Ih :;ne authoriti lees 0n the cof,suriptollr 01
elec'tic energy dulinpg mnore than mont;hs of the year, t,he 195 sales in kilowvatt hours wver(lpractitli) tpeo OlAis in1eained fii the the i L' Report of itIed Statesl doll:1"- a" twhie
it wnssnh~iiz I1d in 94a i-pi ted 1A)Ins et.''i vi,g -t f01U kiC ltUI VIMl.g 19;50,
suistintio iInead.tse in operatintg expenses in 19;() is com pared w ith 1949, was c ausedllli1It'ifll Iii).l!' 1),' n-ip liiliilte' fiZthe'ViiOP1PCt'li(. gl-el"liC I '-m!l .thc 1 AZX 0/. iCu,ldil ;uuH 'ml inl.;'.lS ill \\.'grfnt 7cl to thi wokers fromo May 1 19.50
As a. resulit of a eareful studly meade dlu'iog t.he year bsy the Compan.)y's engirrer wa
slightly revised rat;.es were appliecl in provicling depreciaion fo the yeagr an. These r(' x950 (rates confor'mt to mloder n prac tice t aking into accoun1t oper at;ing conlditionls in 1\Iexico. \ tlu -Rwas also nade with respect to amoltization of the boo0k valube of thle C'ompany's righct.spfranehises whiotr a.cts anod goodwill for which no speeific pl ovisioir iS been made in past; ye1F v s;anldt with tghe year 1.95)0 t;heroe has been inaugurated an annhual plovision for' the amort,iou it norol sutntinlira] i:nre i.sset,s.
ill lt- 1.11v 117 ho bi-ho. yrn r.4;c '11i 0 f,1T,1.'11 w I
Trhe total consolidated provision in 1 95() for deprecialuoi of physical assets and atolrti-zation of riffiht,s, frn,nehi'ies, (O,ItAIVflP ' tId VOW]xvill minnoiixI fS9 to 79 ), i 1,(100 \xhieh i'nh liucle1 0,000,00(0 pesos representing a provision for' retiremnent s andcl rep lacemelnts set, ttsidce iII
accoldance with the regulationis of the Law of the Electric fnclustry of Mexico. I'or coni-parison, the consolibdated provision for dlepreciationi in 1949 wVas $2,27<,:30().
.-As JxplJialied ill IotcU to-1 Uthe l,Ul- heclJ i i.U ll ;i;Uil St,iFIUIllU,IIA, I ild '. (JiijJp tiv lliy ii lss
for the vear 1950 were insufficient, to require any payinent, to be made in respect of' th( onil-panv s obljogatiori, uncnenthe I biz . of ~t he b'1nit-,fie.~ i' Indlty to p:l :I,uu!! ito tte('o\e: r:n'all amount of ulp to 2`%7 of t,he rate base value of its properties other t hi l it.s lpermlleairilt.hy,draulic works,.
AS a result of the reorganization of the ('Com1pallny s caplital st ru tn-ce ull(lel the Plall of.- 1 JIa Ig e ic 1, [Ute P975 0 lfl:ti I.ial ha rgeS 0il full -RIC (I d) c an rU;U iar l WCFe les-,s rnail ill I .141).
'The Compinlay's financial charges will, of coUrse, increase materially as further funds for theS/I ict;-,lrgrnarni are dn dwwnI fr.l1n ib} rI l-1- 1-11 . I -t- 1 1 1
Of' the 1950 financial charges, ^2 'I ,cr40 wa(s charged to const ruct ion account as lb)einig properly.1nlj-n hic:1e to thoe cost of t,he now \vork-
The consoli(lated earninigs for the year' 1 950 will permit payment, oi .J uly 1 next of thefirst, year's i'iteresi, on the (Obhi ny'S new 5 1 -% Cumulative Income Debient.ure btocR.
In 1949 the ac(ciumulated ileficit to Decemlber 31. 1949 Was t1r1nsf'elled t,o (Weierrl-Reserve. Coinmeiicing wit-h 1950( the Profit and L.oss balance for' t,he vear is Il ing carriedforward in Earnlel Sur'plus Accounlt.
TAXES
Tihe Mexican l Ineoie 'r'ax l,aw was revised bv decree pub lished on December' 30,-- I-. -- 1..-S - l~~~~~~~~~~~~~~~~~~l C~~ - I I T - I
I ;l.) U , Ip w ie- o.:1z-l ' -15 airtd i) t ItU~ 11 Iu iuati I lautIJ 0 UIl.~Ai LMIii ZtIjJJI MIIi[- HU I111 I 1 U l PitIILliAh~ I * I ;yv) I . I) rliC[ic - lieinicreasedl rates provided ii t,his d1e( ree the Colripavly's taxable revelluie ill ex(cexs of I ,00.)0,000)
BALANCE SHEET
'T'he attached Consolidated Balanie She'et at I)ecenber 31, 19.50 shows the ('lialiaesill the (C'opn0lpy's capitall Structure r'esultilng froms the Hlal Of \rallngeViLerit , aplp0VeCd b)V t,heslhar'ehlolder-s anid bondholders in lFebruarYv I () arald which became effect,ive in May 1950.It, aLso fleets the Corplipa'lls new filla ncing.
zA,S --t 1 res of the PI*5 of A Ir:-l'-. lil-f, th fll s,' .d' flt.l 6 inpan\
of S 3 ,244 Preferreld Shares of t,he pal value of $13.50 each anll(l 1,77G S3 C(onmion Shiaresof lo n( oirxmli Ie 1__067i-(t( (if the ( oUnnioll rShr o i-edi 1t from i !h o - ( cl'oin t,he 'lain, of the forimler Preference IShares, SecondI Preference Share-'' and Ordinar x Sha-es;t,he re niaining 711,036 Comimont Shares anidl all the new Preferred Shar-es were ussued toNational ''Trust Companiy, Limnited, as Irustee, for distributiori, as pr ov idCed iit the Plan, tothe holders of the Company's formner Cumulative Incolme D)ebenture St,ock.
'I'he new Preferred and Commoin Shamres are carried in the Balance Sheet, at $4t0,t35,6i0(t,h:eingS t,hc aggEregatec of thc boo!;~ valuc- of +the -Ict Ih,EsS t,i )l('ja I-n;t of le *;klI ricomie Debenit ure Stock.
Durinig 19;5( the Conipany issued $1 t1,369,93() UnitedI Stal,es clurTelWv of its new FirstAlortgage and Collateral Trust I3onds and Debentule Stock of Series .A t-o National TrustConillany, Limited, as trustee, to be delivered in exchianige for- thie okic First lviortgage Bolndsof the Conipany, 'T'he Mexican Electric Light Company, Limited and the lPachluca Light aridIo'wer cv '.-n prcilJIl . It .' xvl l)e r-4lel L l 1-t t Ihe UIC Ul MI[U i t l-UVI[UCt IJUl(U' \\ ir grlniteu tie
It
option, exercisable ul) to [Decemiber 30, 1950, to receive frvoim the T'rustee bonds payable inCanadian curren( ', and as t result the amount of this issue payable in Canadian currency is$9()1,692, as showxn in t,he footnotes to thc Balance Sheet.
n) 1tillr I 0"di (.!l (.')nnOrmin' n-Iv issu etil .4 21 .91tAO UTn;fnl -.!. vr.r,lnrind.- n.f i l011
a !2% C'um1l1a,tix I 11onie Debenture Stock to Nationial Trust Company, Lin-ited, as Trustee,t,o be delivere(d in ex\(hia lage for the C'ompap ny's 0o1l 5"% Second Mortgage Bonds ad D)ebentlreStock.
'I'he Co1nsolidateel Bi^hn(e Sheet at December 31, 150 reflecis n the- issue Jtiinicr t-hcyear' to the Fedceral Comlimissioni of Electricity of $5,530,000 Unit;ed States curlenev of theCompany's First AMortgagre and Collateral T'rust. Bonds of Series C in settlement of the UnitedStates (dollatI loan of the same anmount owing by t;he Mericlional Company, a wholly owinedsubsidiary of rhe Mfexican iUght and Power Company, Limited, for funds borrowed for coi-strietion of the Tacubaya (diesel plant which wvas completed in 1949.
Al 11 .t, iVI 'I _asv18 (1111- t JI '1 t1 .L I ti U .JJII. W1 v 'C1 IG. a 10.n.D&UVL ALIIJIl ] 1 0-; t.J IA{} ,11v;
International Bank for Reconstruction and Development in r espect of funds drawn down unidiel1-to (-imnqT- v 1], n leerrrnpylt. witfl I.hi. BRi o- irnntjlfoult. ti to. T8 0O) in Iti;lil p t'des
currency bonds and $164,50() in Canadian currency bonds. 'I'he arnount of the Bank's loall atDecember 31. 1950 ill respect of which Series B bonds had not, vet been issued at thati dlateanountd t,o t-h equixvileniti of $1,470,075 ITnitec States c'Urrent.
.t -~~~~~~~~~~~ I \ -, 11 . w\W1 .. tIe o.scurA{\relicy ,,] ..I
) I i.:JU I1I nloIIt [ t 1 o 1) 1 -0X [U } d IS Ut iue I tl t ±11 IU J |)t.1) f Jl I tuttI U gi, -tt (I tl i I
by N acionl Iini,niciera, S.A. amniotnled to 12,614,199 pesos. No First Mortgage arid Col-11otI.i T rl'ri ustnfic z -f "OrCies n I -- heir- issued as ,-eZC in r espec(t of this l-n.
It shlould be nmenitionedl that the amnounits borrowed by the Company from tihe WorldBank and iNacioi FiiFanciera, S. A. to t;he end( of 1();)O arc not, a. proper indicat ,ion of theact ual1 tempo of the plrogress of the c(istructioln pr'ograininele, for the reasoll hi( flyl that large
o --el I'.>t (1.elil^,y.l eqoipni]�eiit; arte inl i)rocess oif iii<o'iuf atur;le audi I tiCe '. 0111) LilY lili5orulers ror Jiuaclilrierv ani (L11H111t r I F("3( l3l1Z tLY tIILl , )HR1V I1 Sso far been required to nmiake onIly the iniitial percentage pavments on t,hese ordcers T'his is
\iccl(x Iby< thl!,ic favh. 1- f,t 19(_......1-;!_ :1,1':-,( .o(Coli.t;>....... i ""l(?lls ;Itder o;(lersfoir materials alnd equipment fori the progran.l.lilc aggregatlinig l)proxiniat,ely $145)50O)00 U.S.
Otiler importaInt, changes ill the 1 () 90Consolidated Balance Sheet, .S comip are(l with1 949, a.r'e an in cr ease( of $5, 79 S,23 in the pr opei ty+ a ( oun t rep reselting the amiount. (of capiht alexl)enciiture diuritg tne year less propetlyi reitie(i, anid 0 (consOiiolidion wiith the reserve ifordlepreciatioln of the p)rovision foi amortizattion of intingible assets to wxhich previolis reference
1 'ri r~~~~~~~~~4" ~..... _ , I .A'_...nh..s l,een mi-adue Ii 'thi's report. 'L'he conlsolidul,LUeL *ee ve for deIeeiLttUVIioll aic z1oi,j1)Iz..t,Mio
at I)ecembher :31, 1'50), anouniting to $45 ,463,303 .s shown in the Balance ,Sleet, is considleredlsnfl,ipuTit f0t I h (O!l11)Wt!!x S'I'(.'1'oil r ojijit-I!vlt,oo t.o thi onId (tf 10-)() folr.iet'i,ition of itsphysical properties and fo1r amortizaition of its rights, fralichises, contiracts aid goodiwill.
During i350) inhe Companiy sofi tIle remarlaincer of its investment in Canacaian Governr-mienit securities wvhich, at the end of 1949, am11ounted to $450,000. I'he heavy requirements of;,he Ci-pn-m-s -- isu- t-ior. pr ogn-amm over ancl above the ,inmoun s \\!:c hie its abl'e t-o bor roiv(III \-l,lllpally Ill g lll iiU 5 11.1,0) 5tlSjt10.1 C 111 II It, L tt I L, 01110
from the World 13Bank nncl Naeioinal Financiera, S.A., is naturally placing a severe straill of) the('C-.rnn.aro c: z A0itnLir ("1l'ltl7i 0a1]o it ic:(( V.EZ ho Iootr shqt tho C'trrttt lITlo 'CVi I htwsi vt UlflDoto
on a rediuced anmd n ir row margin of working capital until the const;ruet;ion programmiie iscolmpleted.
CONSTRUCTION PROGRAMME
Details are given in tlie Report of the General Manager regarding the Constructionll workeU1:l'ed out durilg 1'-.350 a)Idthe posit.ion at the end of the xroyr of the rinrintql insta!!ationsin the programimie still under constlutiction, namely the Lecheria steam plant;, the Patla hydro-electrie piroiect and the tranisimiissioni lines between Neeaxa and the Federal D)istrict.
(Cowtiw,,ed ,i" PatIe 8)r
*Et111!E1-|S,!t~~1
XSl-|;Al1 iiS
O"Od~~~~I2:~
4~:- - E
--~~- - I"
71 I~~11
III'e . te(rti'!!Sll!!Si.ll,O! f'r \\!Ie IIf!('!' iS In:'CI(' !eo\ leh proesenlt,construetion progra mine sholuld b ul)-i in lid) N on pletedl I) v the end of 1 9'2 itn accordicce\vith lhe estimates mlde in 1949 xxhen thIe 1P1:a of Arralngellient, lvwis subllmltted to) the (Iom-l-panv's shareholders and bondholdters.
At that tiime it wvaS eStimaiwi di thlat I'lle 101 ti (W)St oi the programmnie woula aoulit. t oI he equivaleti l of a-plroxiimately S42, 00,0((00) United States cturrency, com(posed of ,(f ),00) ,00(
p)esos for expendlitures ii I\'l(xi(co represelt iigi t he e(quiviixent, of alpproximat,cly .$ 1 6,000,000.
Oii the basis of t;he most recellt estximites, it aIppears that t}liC total dolloI (0ost5. till notexceed the aforementioned figure of $26,00),0. 1 It, has only been p(ossible, In the face of l'iSiligcosts durinlg the last, t.wo years, tso keep the foieigii cxpeidit iiies withiil the limits previouslyestimated by the prompt, Ordlelillg Of eQ(uilmJIll0I itCIlred for the programme and this ii) t;urnwas made possiblje b)y the ineiculioIis care thatt u a(i beetn taikeIn ini making ttie preparatorystudies and the advance- planninig and w\oirking out, of the niy deleails of the programme.
T'he latest; estimates indicate, however, that, the local cos(ts of thle programnne will bethe equivalent in pesos of approximately C)9,000,000, an inreatse of $3,000,000 over theprevious estiniates. Much of the local c ost of the plrogr ammllne is foi labour and, with risi llglabour costs and :dlso the llncrease in the eost, of buildiilnr materinis thlat, are purchased inMexico, it is inpossible to avoid somae increase in the local cost,s of the programme.
It xill be litdoed Ihatt onll) Ihe -if tIhIe Ial est inates , the total . cs'; ofoth ra-n-\ill exceed the pirexiously estimiated t. ost bx less than 1(1% which, u ndler pvaleitt , olldit iollsof rising )rices, should be regarCded :S vei\v sat,istfatorv.
TIo the enld of 19)5(1 fOleigli CN\l)C iIdidtl(S Wtinder tHie progran 1c aggrega tcd Ippioxi-mien`i eLI T mc,-iiii5uii crxpiCt, i s i ii i t in11 xm it(i :l' it , n ;n li,c(i iii [i utceiixulvleiit,of anpproxi m at elv $4,200)t,000 kniing tot taCl expenditure of $1 1,ti((),()()(). .As ncl tiotoed ( earlier
i i I)o.l, tilt, f^ I ~ p t, O l ls of 11 tt- A' 1 li..... tLj- c111V3 [1C IA 1 Uo 1I9;t 19! 1
refle(t., for the reasons st-ated, the ollre rapid progiess of thac tintUal dI('Vt0elol)iiClt, of t(he
I'he prresent initeriiationa.l siluatioll an(l the clefence progrianme in t;he Unite eI St i tes:lnld Othe-lr COUHlti'iCS h,ls resuilt(ck- i;;th lile,lti;jU;ULUtzioi ofL tAi 1X01bzSOll :111 inm-iint r:iiiiww iilshort supply ani upon the uallufacture :an,1d dGelivery, of many importint i(,ems of m i hllnt'iV*a,(t az,r,ninv,,ganf ?t !eUaIi('' faat' I hl- (_011a.i,v''z S,i~ ijiri ia-aniOl n1aaa9aiaa,na!(:? i'i he vtr- rnl! l;.tv 1-alreild7 ulinder' order dll ol' t.he pirincipal itet is of nmichi nerv and (equipment req uiLred for lhecoliollet ionl of it,s )ioux.iniinitc tiIld . x oivlded thI in omiseiid delixery claf es are inet. t,lhe? cotIst;iic-tion pirograimmine should lie substt inti dly coinl)led t y(Cl l h th en( of 952 ais oiigiially est,inlated.
The (ompauilly is making C xey e-ffolt to obtaill the l nee(lecI cquipimentt in timne and, gencerallvspeaking, has been able so f r to obtailn Cit l cy tl(ies x ire sd usfn t oi x but the sidtttiatOnw
is bcconing more, diffictilt, evi v dayx Itd it i; im1)poSsible to folr Cist hox these matlters willdevelop in t,he futur(. It, is thi( (oinpam) ixs bedif th t dh eie is- a proper appitlmat ion in officialcircles of the extrenie imiiportance of the industria.l developient of Nexi(co a-n(l that-. tills ill-dusti.al dlevelopliient cannot, be maiiitaiitlnd and expadiie(i unless there is an adeqtiualt eSUp)plyof elect,ric energy .. Ac cordingly your Board is hopeful tha:t these imp prtanit, (onsideiations willbei .iiUeii lullv inito aecouuuiit aicl i,i.t 't,i ,OuItiiUIx i\\Ill )t- ;Mille U,o MA.ill tiui Ri t e iiit-ctt1 iMaii<tisfol it,S conist.sin't.irtoi programm n :111(1 ill timle to enable completion if the pograinme onl
HYDROLOCGICAL CONDITIONS
T'he P eport of tel c Gener.i 1aiager cionlt}alins det.ails regarding the \water situautionl.WVat-er storage in t.he (Conipany s ieseixois h:s not, been salisfactory for the last few yearisdurini ig wht ich M'exico hIa:S suffered frI 11 a cyelCle (1 colipllnpatiV (xdoLighlt;. It is tt be hop1)ed th:t
13
this period w-ill soon end and that, there w\ill ag,ain be sufficient rains to fill the reservoirs aridenal)le normal generation of energy in the Company's hydiaulic plants. In the ineantime, asstated in the Report of the (Ileneral i\lanager, it is expected that,, clue to some slight improve-mncit in the water situation in 1950 as compared wvith 1949 and the other factors mentionied,restrictions on the use of energy will not be necessary during 1951 tunliess some untowardievent occurs. Nevertheless the water situation remains unsatisfactoryv ani( hampers the
I A 12I11
T'he Compiny's relations with the leaders of the union of its wvorkers have soniewhatimproved since the settlement last Aay of the labour colRict which resulted in the workersreceiving a 1.5% coalitional increase in wages.
Studies ate presetly being made by the appropriate Government authorities to deter-mine the effect of this increase in wages oni the Companv's rate of return, for the year Mav 1,195 0 to April 30, 19151, as fixed by t,he Tariff Commission as the hasis of the Company'staariffs. In the eventi these studies show that the Company's irate of r etur n h:as not been maini-taimied, as is anticipated by the Company, it will be necessarv f'or the authorities t,o giveconsideratlion- to the manimer in which the Company is to be compenssated.
CONDITIONS IN MEXICO
The remarkable advance of recent years in the industrial and commercial developmentof Mexico has continued unabated during,i the V'ar 1 950. Production in most lines of industryis still increasing and durinig the year many new industrial concernis commeliced busilne.ss inthe ar.ea servedl by the Comipany. The populat ion of the Federal District is growing propor-tionately; it was announced recenitlv by the CGovernmeni Statistical Bureau that; there arenow over :3,000,0()0 inhabitants in the Federal Dist,rict and over 2,500,000 in Mexico Cityproper. in this coninection there appear on pages (i 6ld 7 of this report views of soline newmiioderin buildings which have been erected in Mcxico (City and which indicate the remnarkabledevelopment of the city in recenti years.
Agricultural production has continiuecd to incicase as a result of the Governmient'sirrigation programme andc improved product,ion methods. 'rhe agricult ur al achieVemenits ofrecent years haave placed iMlexico amongst the counitries able to expoirt food. WAVith the excep-tion of certaini grains, Mexico is no longer dlepenidenit UpoII inmpoits for her national cliet.
E i i g.1 c1 1(JI5 n Ith tO l'i.;t I itIra e T inT- -I l ,itC 1 dIn 'I ? -ll lI-i 'II hi t lo t I v I' vl zollft C'I -rI-IT
important invisible export. It is reported that the toUrist trade durinig 19() 50was >1)0 greaterthain in 1949 amid therc iS every indication that Mcxico is becornina incre.Iinglv l)oprlar as avacation resort, painrticularly for citizens of the Uiiitedl States and Canada.
JIn 1949 iviexico had a favourable balance of tfrade but in 1930, whilie both exportsand imports increasecl substantially, there was an unfavourable balance of approxima telydtit: ,()OO,Of) eoscue,iti unde;rstood, to an_ eaigofsm f th I_ tlitolso1i;pu l ;(Uk, kvlj~JJU "kill, A 1 UiUC 'AUU UU dUII U1,d0L1 t 01-11 pe o u ,Jk ,-" IIK UtU1"L ,11101 iIIIJI1 iI
to the inereased cost of imports due to the devaluation of the peso in 1949. fIn 1950 therewa,;: hmowevr,r a fonir1ahle halaq1nncer of pqx;mpnf-t, n.f--cilinnr to rrt'. isrsu' by, tho I*ntI-
of Mexico.
Jimiflationariy coilici olis are present, in vLexiCo, as clsewnele, ainu uthese nave beemnaggravated by the heavy influx of United States dollars during 1950. The Government ist,aking measurs designed to *cducc domestI c - -liC, -ueh Cas thc jk l of.-..- cxp,ot U)of Ut
certairi essential fIoodstuffs and certain materials, uitil domestic needs are satisfied, and themakinfr of C.'overnment loans to furthor st4imulat;e agricultural production. The general cost-of-living index of the -working class in Mexico City rose from 348.3 in December [949 to 362.1in September 1950.
I,
1 .tilC 9(19.5 thlle U llited St.ttes awll d Iexico Mitni)COed the caiicellatioi, hy mutualcoiiseiit, of thle 1949 Tra'lde Treatv hetweeii the two m0(lintiesC totil caincellatioll to becomeeffective on.1 Janitiary 1, 19)5. lloi SOflie tiie prie\vious t;o this. XMexico hac l)eeli applying,with the agreement; of tha Unite( d St ates, quaint it itive irestrictiOns oni imports fl'omIl thatcountrv iII order to recdu(e the then setious draini on I\ lexioo s (ollari resoulees. Qn O January 1,I951, upyon finll ( ctna eellati l of the triacle agi'ee leiit, Mexico re0moved it's restlrictiolns Onliml)orts frolml the Uintieci t ite'tanesut aidopited short.li ithereftir a tit w tarifi sCheduie and animport liceiisiiig system lesigine(l I)partly to discourage the importatl-iotn of Itluxuriv items andpiarfl- to pUrot1e1t) I"s (vv1 Inldusti ies. Aert.inI el.lae oft (i (11)iIet 1eqltlred hy OLII' (Lo011paiiyfor it.s coml4touctionl programme are subrjec t to these netw taiil's.
T'he fillillciai positionl oif Mexico remaiis fa voult.i The niational incolmle showed asubstantial ille rease in 1950(: :md, for the secoii(n v e.Li in Sll(''CSeSiOI, t.he public treasury showveda sMiPllus. I I Ltt -11 LA"C l l -r:uui (J es t,h 1.IL I I I\ (of o'1 \ItO e iiic easxo v IL as wVell as1 money ilnCirculation, (redit :ncl iidvestnient$ s. ns a cti -infla tiOI ary meisuire the (overnmentt has
lii- en U n,', i I iin ni,,,,.i i- I I... t.teI, en tei .c'L1 p raf tt bId i Co redCuee Iwiibb , I iii eileu.l baib'l,tIIII to1 r.dri l I ed'I
h'e ab)ove b)riii sllmnmari of genI (l ollditions in Mexico di cluri- 19:0 indclicates thegre. adv aIMnce WinI is si,ill triaking pIace in ine eeonomi( and industrial dievelotpm tent of MviexiCoand her present favowuible tfilnll(ial poSit,ionIl IFlo\eter, it ill he fully appr (eiated that, thejIbbli l lb Jhlfl(( o .l IChis Ill l;)of ill the folA 1l ii life of I l/txicJ Is. e ,Ill depeIIli elltl1)oi aln a.lerjua.t e upsl)pl of eletfricity foi- it,s indtustries: and therefore the completion oni
s.cldclule of orOU__ C.O!'Illy'S (l-ollstlru('e1
l()!m1 )1(" ztnirle iS of par,,amllou tlllVol (11ta1e since aserious shortage of elect ritity is ot.herwxxise bound to result.
CHANGES IN DIRECTORS AND OFFICERSAl Ht, !;e zt Awm!dE1! _klopt'no (if tll' ((Xcmm1):mv\ lle!( inl Sep-tembe!re !1050, Rar.onl R4ichn1a.1,
Mr. .J. S. 1ollnested ad 1 Ir. C. F. Imifley rettired fromtI tie Btard. 'f'he Board wishes toexpiess its ampreeittion of their services t;o the (nolpaln . At the A\nuiim.l Mewtinif there wereelected to tlhe Bloard in their steadc S'ir ReLginiald Leeper, G.('.I.(-.., (B.B. , and i\MJr. 13. H.Binder of 1,oniloI, Eingland, .c(l I .i Juainl aIr ,tinez [ejeda of Mt xico ('ity More reeentlvi\Ii W illiaml MIelnschlaert, who for some y ears has rellde'red jillport.ant services to your C'om-pt, :n s a in ember of its Board, fotund it, IleSe1S:ii (Ihic to other respmnsi bilities t-o suL)mit. h1isriesimlition i which was ateepted with reireLt. He 1lis b)een relplacdci oni the Board by Mir.
eBi16 ]iioselns.])ue tIo thme ill eiased re- pl)(nilbilitiet at T(Ir ollto OftlW( e, il. I .-\. (I iavdcln ha:s lresignied
a, ,Secret.ary of the Compny)1- butbill, ConttillUCes :rs Vi -PrIstidenllt ill (hll:-ge of Torontto Office.1vir'. Grienie i. e rttt, his beei aIppolinit d to thl post, of ,9ecretall.
STAFFtlhe ieorganizatiomi of the Coniipany's eap)ital st rt utire, thle inew tinino ing, the heavy
('/)!!1 't!.'iO' p'O,,''allile 1111 .lll !lit,'l':l l O fX'lCflSO!l (if +t.ln ( 'lb llj)lli s o ilc: zIi ni(ll inl .n liitii!istiiiitiOfl i~~~~~~~ogiaI~~~~ and! tl.- "Interial ex-aIon, o the ,n - U1-1 JlI~tl1,tplaced greatly nwirceased de-in-1nd5s (II the tnie alnd eiergy of the staff, piarticularly the seniolofficials. The'ese lhen v ol liL,1i I iols hlve been llet. lovallv and IIfficiponv t.l !m vtlt Ol!! BOat( wishesto iecoid its great :tppreeci:tiou of the services renidered by all the officiats altid staff of theCollpanlly, inll Mexico aiild Troli)lto (,durinig tle year 195.:I0.
lor the B3oard of Directois,kGCorge . viessersinithi
TILoMilto, ('aiacla, C'hairMMIcI"liZIA, 1 1, 1 '-).
7i//it mp/(o i8's /pI/t/ic 1s to iX e toi Ule press riMerly ofitemws 0I bl/ilcr mo?in/lh/s .hrelders desirousof ming /l0i7 1/ Cil 11/ Immes ce)C 0p 1 tihc 1it1(ili 1/ list to rercive ae copo, of tiCe q/0(arterlyC eartbi/gs stlele cmls directfrom theCOb bIPall / bib t11011(l azr,dr/ri tl/ei rceQ/IC s ta lt'i- ~le I'trl]
10
II
GENERAi IVINAGER
7'0' TNIE BOAII 01i'F DIRZECTORS',$:
h bee l;o submit the followina reoort on the omrations of '1'he Mexican light andfI Power C'orripaiiy, DLimiteclI anid its subsidiar y cornpanlies foi- the year einded
Decei-nber :31,,1950.
Ats is custornixy, the amounits mienitionied in thiis r-eport, except wvhere ot,herwvise stated,art- pFre-sented in terms. of C',al-di-ll d11rs
GENERAT;vN AND ENERGY PURCHASED
A~s imentionied in lasl, year 's rep)or t the r ainy seasoin of .194,9 -as extreinlely unf.avourableandl, as a consequenee, r-esl;l-ictioris had t,o bc inmposed in the use of electric energy startiing oilJ}anuai-3 19, 1950 alnd Wvere maintainled for- mioie thani six inorlths uint,il the begiiininTg ofthe ra.inly season c)f 1.')50 mnade possible a higher- genieratioii of the hycdroeiect]i- pianits oithe initei-conected systems of the Company aeod of the oederal CoifiTheisioan of Electricity.'Line reSPIC o0S CMer Com1p1ea Li d n11 .JI sbiiy, 1 compalni for the rest ode the y dear rOfurther mDeasures htcmb to be applied.
As i cosequesey the above situation, the total a,mexouct of energy gerewiates andpuIrchased ducl'ilg 195.,0 wa.Is i,79() million K.wrc . as compared vith 1,8.0 illloi for 1949,a' dlecrease of 9 nillioas ot 5.24ya's durior g the yen ofp1949 as aet inrelease of 121inillioii in 1949) over 1948S.
a All, the theamoelec,tric platis of the Coimpainy had, of course, to be operated at fullJanuait,y d19ir,g 1 knd weni re arin0 aned foir ovre to ha osirtond ath fll production through1h9.e or at least until the beginning of ths raine y seasor .ge he enerio y generated duilantg 19of bythe thercoelectei ystations of the Company, includiiog the raillay Counted m ls,0(0 o .f . steaniturbo-generator and the eight 500 K.mw raliway mounted diesel -units which, as mentioned inlast hear's repost, here tmade available to us by the Ud.ited St;ates Navy, was 921 millioiiK.Nv.ii. as companred oifth el milaion in 1949, , hile the total energy generated in thehydroelectric planws of the Company and that received facom the intercon1,ected hymloelectricplant of the Federal 9 omimissioon of l4ectdricity ysaras c to m r midwitihin K.in.i. as com-parel l ith 1,085 inillioo in 1948 9.
It is interesting to note the rainoyint of eon.Tegy generated by the mobile units made
lsyersrpr,wrmaeavailable to us by t,he Unit,ed 8I;ates Navy,Nhc Nn ,84,7 .V 1 o was 921se miiosnd
65,848,000 a .c .r. fow the st;eam tulbo-geneiator. 1 These figules shor the substantial helpthese units have g Uive di us.
THE MEXICAN LIGHT & POWER C° LTD. 1j800
AND SU B SD IAR IES A R I[
CLASSIFICATION OF POWER GENERATED
AND PURCHASED 1600
J PURCHASED
I ST M - \ ; -D I E S E Ln I 3 !I..- . Z Is T E A M i :5 _ |4 U I
H Y DR A U L I C L
FdSMpH-|M80oDut~~~~~~~~~~~~~~~~~~~~~~~~~0_~~~~~~~~~~~i1 ~ ~ ~ ~ ~ ~~~z
[~~~-- mUf Iga ---7 M R-5| A 1 00It
,' C ,... o
~~~~I~ 00
1935 '36 '37 '38 '39 '40 "41 *42 '43 '44 '45 '46 '47 '48 '49 '50
At thie rfcniu-est. of tht-e Fnvdtel Nt,.( v i\3 . tfh(p eight ivinhilp diesel 1l1it., 1erereturned
at. the end of 1950( but;, takinig in.to considerationi the nie1cis of ouri Company and the fact that.the rainy season waS not, fa Vour1able (durina 19'50, the UJniited St ates Navy Depart.ment. agreedto extelid for another y-ear the contract for the lease of the steam turbo-generator of 10(,0()K. \V. [l'he extelnsioln gra:n1tel b)y th,e Unlit.ed Stat:es Navy Del)par'l 111 tm is sLlbject however' tocancellation shlould the Nlavv nee(!d this Unlit at, any timle.
Despite the import,ant, reduction in the amount, of energy generated and pulclhased,the total etiergy sold Ciulinlg 19;50 was 1,344:3 millioll K.w.ii., a decrease fri:omi 1949 of only 5
'illion, or (.:37 7. Trhis satisfactomr result was mainly due tlo the installat,ion of meter's duI-inig19.() for pracUticatiy ali tne 30i,iuJ (CUSOtOIlCI'S laCKinlg meters at tne C(I,01 of 1049 anl whio nia(ipreviously heen billed oni the hasis of estimliatedl average consumpt,ion inst,ead of actual conl-
.Ulllpl,IlUli. IJhUI I1g tHILU IitFl. tA's U M111 ,111,11.F Il tL11: y'tiY, 1til k-1UlhIII)ithly 's's i t V tlk'U itlJIUC 1) tUaLl I (tiC
collvelsi(I-I into metelred ser'Vi( Cs of c Certatill number of flat-rat,e services the aetual corsurnlp-I isIn Xof 'sv'hich.'sv \\"ISfhiilt In III 0ln Q t}iSll"'ds-' ionn it sho11ulA Ie 1n1-Aioc-A thtj-,i
aecorlacra e \w bli the rates now0 ill iorc(, flat-rate contr';actS can only be signed w'ith customersnlot havinllg over 40 watt,s 0f iinStftlled ( -aDa(cit,v andl met,ers murst be inst.alled to reciorcl and(l billthe C01SUIisupt,iolr of the SO-watt I customer's whio had pl'eviouslY been conrtracted on1 a flat-ratcbasis.
D)ue to these two factors, and rmainly to the first, one, the dlistribution losses in 1950decr'eased substant.iadllv. 'I'lTe t otal losses of the svstenil ill 1 95() were 21.3:3% of the gerner'ation
as compared with 2'..;!1, 3 in 1949 and 28.05% in 1948. The figure of 21.33%O can be consideredas normal for our system and no further reduction is to be expected until the new transmissiorlines between Necaxa and the Federal Districtl are placed in service.
'l'he ietr~i Ut julis irl Lilt u Vi Ulo U lct1iii lie;gy have3'7, IJ Iourse, aifect1eUAdl all our customersbut, were less severe for the industrial customers as the intent;ioni of the authorities was to.0etF1-.t ;iflliiQl Il i;Q1 7fif(tifll fl nA finlp n- iQii In fnof. thii omnp-ro 'tol(d to ouir i,urrrp hirrh
tension industrial customers includinig mines increased, in spite of the restrictions, from 662million K.-\x.ll, in 1949 to 685 rnillion in 1950,. this increase being however mostly due to thehigher numiiber of industrial consumners contracted w0-hich vwas 770 at the end of 1950 as against730 at the end of 1949.
The energy sold to t,he Pachuca gold and silver mines decreased from 111 milliolnA.I1. ii. ini A3 tJtLU Uto 0lilillion im ]-J11 minly duu to the Dos (- _-',a-los ii ax ila tLdllUnedwvork on the low\ er levels. The energy sold to the large mining cormpanies of the El Oro district,;fin!ilcl(r A-,cr nfallnn, iV.IS 23 7 nidiioni .t. iv u tir iifrOv;rifol!ihir lthe Q'ifllo asQ in 1049.
The energy distributed to t;he Mexico City dlistrict, was 1,293 million K.w.ii. as againlst1,403 million in 1949, a decrease of 7.8676.
Our customers numibered 464,805 at the end nf 1.tO5 wvith - ,.ntrn.te a inri of 871 914
K.W., as against 454,557 ctustomers at the end of 1949 xvith a contracted load of 825,367 K.W.
Gino ~~~~_INPXOXWEiRM _SLE 1 2 0 0
1100
I_ 800_0 I E N
7 6900 a
1 | _ -110~~~~~~~~~~~~~~~~~~~~~~~~~~~~80 0
500
400
0300 -
- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~200 I]
---- n-- lo o
1941 1942 19A3 1 944 1945 1946 1947 1948 1949 1950
i3
HYDROLOGICAL CONDITIONS
The rain. y selason o! 1t <1 9 \a 5'ienht Iol aao!!! h! hto h )'\iU
year but as a whole was againa poor one. This can ibe appreciated from the following figuresof t,he wat;er eterinf the reservoirs hiirtii 19.-)() which at Necaxa amnouted to 416.9 millioncubic mleter-s or 70%() of the previous yearly average recordedl as comnlpared withli (;62%7, in 1949;at Lerma :342 tnilloion cul)ic meters or 49(7' of the yearly average as compared with (62 ' in1 949; at Ixtapantongo :30:3.1 million cubic ineters or 65%;'/ of the yearly average as comparedvit.h 61,% in 1949.
However, due to a slighl impl rovement in the water storage; t,o the fact that Nve couldcounlt on the geneI'atio. of the steam a!d dilesel umt.s ma:lde a vailahile to us bv the UinitedStates Navy and which it was p)ossible to operate durinig practically the entire year 1950 at,full load: to the hell) received fromii the four portalble (liesel generating units which wereconnected to our systenm ly the Federal Commn:ission of Electricitv- and, finally, to the factant,~ l) Electricityywathat the new Santa Barbara hydroelectric plant. of the Federal Commission of Electri ity I asplaced in continuous operation in February 1951, ino restrictions in the use of clectric power areexpected to b)e necessary dulillg the balance of the dry season 1950-1951.
FARNINGS FROM OPERATIONS
Despite the small reduction in the K.wv.ii .slales, thie gross operating revenue of thle (,on-"-lx -- i-,' l-.x.--v, (xI ~ ~ ~ ~ :11-L AlA iv-71 A00 :__ I CAl _:----- pally ini ;30U was 179,921,u.1 -peso)s, as oullpal-ed c i,u lv ti0 -,U1 q e,s0 ill u an Hincrease
of 20`7%. This inerease is mnainl1 due to tle appiciationi of the new rates which, as mentioned inlast yen-'s report,,bax 1 xc ffc.tive .u of Decehnibcr 15, 1.10- 4 ,0 to a sn ,lt 1.r 1IPUT,qx to the
adequate lbilling of those dlomesti( an(l oommerci.al customers previously connectecl withoutmeter s=
On thle other hantd, the operintin.g exp enses inreased substantially, due p)rinlcipally tothc highlel tinermlloelectric generad.timl( anid to lhe ,'O oiur tional increase of )ages grantedto the workers as fromii May 1, 1950.
Wheni the Company's new rates wcre lbeing studied in 1949, the Rate ComImissionassumed that, the cost of fuel used by ithe Company in it,s thermloelectric plants would bereduced below thie price paid in 1949, in view of certain conversationts w-hich had taken placeoni that subject; with Petroleos Mexicanios, the supplier of fuel. However, this reductioni wasonlvy miade effective as fromn July 1, il;50( anicn as a conseqluence ine C'onipa.miy s expenses forfuel during 105() were appr oxinmately 3 imillion pesos more tian was con temlplatedl in the rates ,d-.t Thi. exr. c.,s ...... hc l,ey;u;;...tI l ly , thfv;p l-- ...ug! thc apliato0I U 10C .0 1 IC11rIL I AtL lll. >1-01 _1. LIII. U- II III. - JIIcLLJ
of an adjustment in t,hc rates, effective as from January 1, 1951, which was approved by the111 ±h1u *i xl.s ,I l)tL. ! elll l 90( 1!)5()
'T'he net, operating erevenue, explessed in Canadian currency, was $2,2604,098 in1950 as comp)arcei wit h .i, in 1949.
The conmarative consolidated figures of operating earnings for the vears 1941 t.o 1950inclusive are shown in the Consolidated ,Stat istics appendled to this report.
COLLECTIONS
It was noit possible, dtiring I 9-u, t,o collie to anly arrangument e it vin prescint. acunnnnrcs-
trationi of the trarmways system) for the settlemenlt of its debt. It will 1)e recalled that theT-a--,vavys (',-.,.-. ...... inter ........ I the It IIth ,ics in 1 ,1 r, -A 1- d has 'c opIe s c
f-IlI I.'.J IjltI x.0 I..lt,1Z SI -, UIIC fJf tIl.1 -,- -Ll0IIl" Il I. -j* _ _ll __11,0 ll,l 11- t-lA.-
theii by a representative of the Federal Districit Department. The total of bills reirmaining un-paiid at the il(1d to!' I (-LI)nllunt.ed tn R 09 / 17-4 npo as5 eoynn1 rcar with 390 073 n-esos t. theenid of 1949, both figures excluding the 10b()', tax on the consumption of elect-ric energy. Thesefigules do niot take into account' certain credit,s in favour of the traniwavs w-hich are being
'C-~ IN THOUSANDSi >1 OF K.W.
i NCR EASE i N T HE O K
L O A r O ki T D A r T r n Y M E O F _ | .| 2L W ~ %. .. . .,,- . 0 .
THE MOST IMPORTANT INDUSTRIES 25
I N TH E ZO N E S E RVE D BY
THE MEXICAN LIGHT & POWER CO LTD.AN D S U B5 IDIAR I E5 20
FROM 1 942 TO 1950
M W ~~~~i1942 ~or I I"W 11950 Ls 1'"'1"1
ZIZ 1l942 $l
EXT I LES~~~~~~~~~~~~TIEG MILLS & FOUNDRIES
I_sRT~~~~~~ EA LP RO DU CT S C EM E NT P RO DU CT S
^F wlC il I XTI5 t lTREES AND RUBBER PRODUCTSI MILLS & FUNDRICEESANEOUS
i WUEIIE -1 -, tOl mPING AND REFINERIES]TCHEMICALS, MEDICINES AND PAINTS
m LOUR MILLS AND BAKERIESVEGETABLE OFIS AND COMPOUNDS
I YIEIJX , lmASTEURIZING PLANTSCARBIDE FURNACES
> \ 1 1lSl1 | . i >w E R cW c ; cS A ND SO;FT DR;INK SND RERIGERATION
RADIO BROADCASTING( CERAMICS AND GLASS
i 21 OVING PICTURE STUDIOS_/ JC.vvZQUARRIES AND BRICKS
_ g ANNNE RIES_ ,- -A RETTBER MILLS
GAETE_PLAST~ICS
held in suspense. However the conversations relative t.o the settlement of t,his debt, have nowbeen resumedl arnd, at, the time of writing lhis report, a satisfact,ory verhal agreement. hasbeen reached.
f'olet,ols ':In the Fedlet-1, Stat,e -J T 1esrt.v-ivi for ligh t anl- VIoXIr
services were satisfactory. By the endl of the year t,he Federal District, as was expected whenwritillfaIt In."d l', rnt) , xv.-IS llp to (lite i it.s pvi-ents to the, Company.
CONSTRUCTION
TIhe nronmirt,' 'tC(oul!t of tOw (nOInn 'i!ICd it. s bsildi, rios increased in 19;;() hvn eltamiiounit of $5,798,823 as against, ani inc iese of 8S,946,574 ini 1949. This net increase is conIi-pc)se(l of gross additiolns foIr work complet(ed Ol' in progress bv the end of 1950( of $6,437,628,Iess retireme nts of property at actual or estimated originial cost amounting to $638,0().
During 1950 preparat,ory work was sttrt,edl and(i orders for imost of the equiplmenit ixvereplaced or discussed wit,h t,he inanufact,urers for the major portion of t.he rem-ainider of t,heconstruct.ioni prograinine of t.he ( Company. The p)rincipal installations still ullnder constrluc-tioii are:
a) The lTecheria st,eamii plant in wN-hich, it is explected, onie of the two 33,000 K.WN-.itS (l!r0 l voil 11 ujt If ilt nno)e III t( b t he o nd o fthe yc ,!'.r l\.}1
1)) 'Ihe l'atla hydroelectric project for x-hich all of the principal equipment has l)eenor(lerc(e and in resl)e(ct of \\hich a cont,ract. was siginedl at. the cii(( of 1950 with Empresa de('onistruccionles ( etierales, .A\. for the idrilling and(I lininig of tlhe pressure tuninlel, the const,ruc-tionl of roads and thle ( iv il xxoirk in connection wit l the wat.er it. ke, ineline railway, penstocks,surge tanik, po)weir p1iit, etc(.
c) 'I'he colnstrluittion of t,w-o three-lphilse 220 K. v. trinsrnission lines fromil Neca xa- tothe Federala z l)icst,i(t,: .,-{iQl-, *,ofah- ut 137 L-Jl l 't fol f,8 I-II t - i th, iI w itifl,i'I t.( i '.Q ! I IIl If-f
have been or(de-ec as well as the major equipment for the two terminal 230,000 rolt, sub-
cl) The installation of the 100 K.v . siigle circuit. three-phase pressure t.ype tidler-giotiui(n caie, 5,7 > inetelrs long froll1 IA I-oiloaico io NIan aLazar -o a1iLi .3,99i' I1Ieteri. 'ioill Sail
Lazaro to Jaqnaica, is in progress and the caible is expe(.cted t.o be put, inl service ill .July 1951.
During the year. the conistruict toil of t.he Huast,eca subst ation of 20,)()0() I.AV.A. was wN-ell(Iv!xq lip(t it Aw'i}'r.ql SU?t' it) m the i iS<imlln tioi of 36 i00()l .5 /44/22) KV. t.r-:1ansformerICs
a-nd three 115 K.v. oil cir(uit, breakers was completedll at. t,he Notioalco sublstatioii thlie instal-lation of t,he Mulsifvre fir e pioteectioon was well advanwed: the Pantittlan ;,000 K.\ .A. subst,at,ionwas ill progress; It. Niecix plant, riansfornier hanks 1 anid 9 were re1)laced 1hy iiexw :32,000.V.A. banLks: the 6,()()0 xolt, lines, three-phase circuits, wxere extencdecl i20) knins. the 20,000
volt lilles, th-icee-phcase circuits, were extend(led 75 kIms.: the coostlu (ution of x arious sulbstat,ionsaind feede's wais (cariied oUt to supp)ly electritc eniergy to nexv inidust i es 1n(d ot,her coisuIir's.
'tlih capi itv of distribution t.rinsforiers was incr(eased by 21,40i K.V.A. againist anlin(creasce of 2'4, 45 in 194); in t.he public, lighting service 9'.ii addit.ionial lalips wereinstalled, imipioviing considerably t.he lighting of the (ity mid suburIs.
Tl (olistructiomi of the mant.a 1 irbara hydioelc etrii plnint of t.he Federal iomnimissionof li'iririt.,ltX' wtlz m-litjqlax, finiisher- -ix. the end of '.1 t) n.nd it t hl time of xvrd.itw this re'ort
the generation of two 22,5225 K.W. xUllitS illStalled ill this plant lihs been- miiade available for(list ributioll by our (vu illonm . A thllid id Uit of the samie cat)ac itv is at t)resent unider test.
l6
LABOUR RELATIONS
.-_ IW&IIUJI JI.ki l i Ihts U 's;U c , nIIt"I agree Imcn O tas iglUL e I o I.Icby L fJ, I flju I; ilul ULhCompipany's labour union, l:)y which a 15%70 wvage increase xwas granted to the wotrkers fromMayi.X 1 190.0 This increase is enndidintimnl honwuper, Unpn the Ilit enarnin cr nht,i np by theCompany in the period M[ay 1, 1950 tzo April 30, 1931 being sufficient to cover such increasewithout reducing lthe rate of return belowv the figure fixed bY the 'Tairiff Comnmission whenapproving the new rates for our Company. As a consequence of this settlement the 15%',4 wageincr ease has been paid provisionally to the wvorker s from May 1, 1950 and, at tlhe timie of writ-ing, several experts appointed by the Rate Coommlwissioni are nmaking an analysis of the resultsobtained by the C(ompany during the last eight months of 1950 and the expected results forthe first four mont,hs of 1951 to ascertain if the earnings of the Company durinig that.twelve-month period will be sufficient to cover the albove mientioniecd -wage increase.
Since the settlemietit, was re.aIched, no serious labour difficulties have been encountered.
INTERNAL ORGANIZATION
Since settle:ment of the many problenms which had to be dealt with in connection withthe financing of the constructioni programme and the financial reorganization, the offlicers of'the Comiipaniy have beeni able to devote more time to stuclying methocls of improving theCompany's internal organization in ordler to inclease ils efficiency and to imnprove its manivservices to the public.
Tl'he major activities of th~e Companp-ty have now- beenl groupecl under four importIlntsections-Adminlistr ative, 'T'echniical, Commner cial and Treasury-each hea(led by a. seniorofficial resDonsible directly to myvself as General A/lanaver. This will relieve mli of many,11adminnistrative detaiils andl leave me more free to deal wvith important problems.
At the pressent tlimie disCussions are aking pIlace betIweell tne Company and its unionIwith r espect, lo a reorganizationi of the Commllercial Departmnen-t in orcler to inicrease its generalILL f T; y, .;o nure iu, . ,. L . + L, II...C A. L, a ., < L U ,} I . lC 11 l ., rLIfl II I CLCflI ; C II AA C IL LLA II UA I II thUA Ul L C
sigming of contracts, etc., with the Company's customers who now total somne 465,0(0.
TAXES
An inicrease in the incomiie tax irate was approved by Congress onl December 30, 1950.'The new rates in force are still on a sliding scale, but. reach a maximum of 34c,% for earnliiiigs in
Cx(cess of one riiillioni pesos as agailnst 31 % previously foi earninigs in excess of 500,000 pesos.
I his JeW ]-i0o111C LLaX FaiU coes IOiU affeei eItine i1 ;k) eartllilngs.
STAFF
As ini years nast;. it gives me uleostire to mentioni at this ti3ne the loyal services of niwstaff. Due lto the problems placed on the Companv the lemnainds on each individual arecoonstantly growhing and t,he staff' is meeting these new obligatim0s1 fully. It is a constant.source of encouragement to be surrounided by these loyal employees.
C. MARYSSAEL
Mexico, D.F.,Ap3ril 9, 1951.
17
CONSOLIDATED STATISTICS OF GROWTH
194 1 11942 194 94 4
TorAL ASSEIS .......... ... ( v C. SI 16,97:3,437 $120.587,141 S116, 142,1 86 . 5116,746.389
GRO1SS OPERATING REVENUE (Jan. C. t. $ 9, 887, 71 ;1 11,405.194 S I 2,1364,766 $ 12.627,880
OPERATING AND OTHEI lEXPI:NSES
Power pilrchased ... ...... ( . tIl 1. c ! ' 8' $ 54,321 S 52,181 $ 231, 794
Opelration :iid main,ten e ... I 8 4,695,553 .;,30;,859 7. 29.';S
Taxes, i neluling Alexica n t.axes...................... - - "1 470 004 2 347 039) 2495.563 2.018.081
Provision fi l depieciatiori ai ;am11ortizationl I .4.8(i() 1,5.584,864 1.685,000 1.616,000
NE'l OP'ERATrING REVENUE .... Calil. Cy ' . 1 ,756367 $ 2,723,417 $ 2,880, 1 63 i I.6:32,421
!ENPERGY (,ENEIiATE ANDI) PURCHASEID) IN
AMILLIONS OF K.W.H.H-lydIroelectric generation.. . 929.56 1,090.27 1,038.96 880.42Tlherimoelectric generation 134.37 1.23 90.28 191.04
IPuirelhased cnergy ............ 25.64 21.50 21.12 74.95
Total ............ ,, 1.089.57 1,113.00 1 t50.36 1,146(41
l:; j[:;.v.:Y S;.l ;) IN \.1'.. .O N .: .. .,7160.92 8! I,. 9 -
K.Ws .H. SOiD ...... aCl 4 !1. !. a...') I .40 1. .42 1. 4 t6
I'I.AN IA (. \CAI TY IN K.W.Hydrolelectric mt .... ,,650 23,650 22 3. t5 u 2233,150
Thlierninelectric plinltts ............ 30,000 30,000 :30,000 5s,0oo
Total .253,650 253,650 253,650 278.650
IxtapaIt.ollg() Plolanto foederaIl Coinmiiis-.sioll of IElectri(itv (interconnected).. i ; 27.900
Tlotal 253,650 253, 65 0 25:3,650 3o6.510
(.ON'I'RActrFD l OAD IN E.A.! v es i d 'e.e. ti t....... . ....... ......... I5 ' 0( 171,777 187.872 2102.779
C(mi'il'ercial, induIstrial :1( othirs .. 255.980 283,140 :306,:386 326,179
I A id1 ............................ 1 I 4 '.,4,9 4-.- -95
1IcIE:',ST !SYsTEM P1EAK (I 1Loul) K.W.. 211,390 214,225 222,409 229,338
*YEAIILY SYSTEM l,OAI) FACTOR ..... / 0 58.84 59.31 59.04 56.91
NUtMBER *OF *fN;SE¢
Residential ...... '228.807 240,292 259,941 277.465(Cninwlercial. indust,rial and()thes. 6 G9, 351 72,182 76,547 79.936
TotaL.. 298,158 312,474 :336,48S 35-7,401
PIO.)IULATIION SER\X Fl) (APPOrXI.NATE . .. , 20.():) 2. I1 I.,.1 -7) , I 2 1- '20
NUmmIKII (o, IT)WNS ANI)' I l.l.A ES :V ............ -221 20 2 2 24
* Truat inyg thc in0trconxt) aedt
1. I.tapntJlll)ltoIlgO pia at (ourinC(c by tiie F'ederai (Conoln1 issiol of I; !'. ; ) as a part of the system.
T \ ot incIlldl.a tq/c railow ay m0o0 tild a imts rentnlcd froi tIhe lnited Stotes af'Navy Illd l/ic ptortable uinits installed temiaporarily by
tthPo'luamiary ((ca 'nsu 1950. 18
1 9 4 5 1 946 1 9 47 1 9 4o8 194r9 1950
$121,209,303 S123.674.71/ 3 S1 27,181,065 $131,082.287 139,096,695 s1416,746,787
15i.62:3.98 S\ 18.236,579 $ 19,924,091 $ 20,289,113 $ 19,3:3s5,834 $ 22,603.770
.S SS3,(99 S 812A-fi7 S 800,772 $ 1.207,0,52 S 8SG.o107 S 1,251,666
7:39,55 7l, 2..1D¶l 1:3.;9i1t3,4 2i2 , II9 I I ,;44 7 i2,4.41 I6,1Ti3 , i i8
2.790.29(6 3.098.370 3.308.885 2,869.700 2 470_909 9 767.RN8
1,782.000 1, 813,0()( 1,8144(000 2,0:35.000 2,278,300 2,272,000
. 2,769.918 $ 2.787,386; s 3,056,937 s 1,261,735 s 1.274,877 2,604,098
1,045.32 1,03:3.27 889.40 952.45 789.79 741 .54
61.28 23:330 4:34.5s 534.76 801.041 921.47
184.78 20.14. 1 224.63 280ft67 298.10 127.21
1,291.38 1,472.71 1548.61 .767.88 1,888.9:3 1,790.22
970.7:t I ! 1,079.60 I ,2 7 47 1 ! (V. 2 1: 13229
970~~~ ,~ ., .<
22: .-6;(J 2293.650Q 22:3,.50 223, 65)0 2:23,65( 267,59(5
55,0!) 5-5.000 80,001) 90:300 i 10,9(0 II o9)(0Ot
278,5;.0)O 278.650 303,650 :313,950 334,5501 :378,495
27,91)0 27,900 55,8((0 55,80(1 55,800 55,80(
'306.55(0 3:0 6,5)50 359, 4.50 3 69, 750 :'390.:350 4:34,295
21 9:34:3 2381:37 264.423 276; 034 292_957 I! (i 974
356,0:35 :387:382 439,193 -191,577 5:32,410 554,240
F i,5 67 6 19 'I m ii 7i7 , I1 R, ,Ii7 8 71 2!]4
25:3.827 283.211 31 1,601 : 338.565 355,570 :364,57!
58.08 59.:36 56.73 59.45 6(1.64 56.06
294,.758 309.771 324,150 338,944 :354,411 :362,27:3
81:38 89,:307 9)1,888 96,092 100. 146i 102,5:32
37S,89(; .399,078 4I 6,038 43,15.036 454,557 464.805
2.210,00011 2 2.0 (. 0(1 2.,2 i0, 00 2,21(1 ,700 2,3 07. '01oo . 0004
,_ , 9Qr 927 19 J_ vel _ W~~ ~~Ub JUl JOo v ) o
Substantially all tihe power daenerated at ihis plant is sold to and distributed by the Company.
the Federal Cousmmission of Electricity.
19
w: ~~~~~~~
-I j iNW--V
AMA
-~~~~ ~
4crial prhotograph of two of the lower Neca.ra re.eCrvoirs tfaken. it), lIano 19.().
(7'iae her-e photograph a-d the aerial phoioyraph of Mexico City appearing-i 010ie rclpOrt corer by Corm pa74a M exicana Aerofoto.)
A U D I T O R S' R E P O R T
To the Shareholders of
The Mexican Light and Power Company, Limited:
We have auditecl the heatdc oHice accounts in Toronto of 'rie
Ailexican Light and Power Coinpaniy, Limite(d and The AlexicanlJlof,nI..., furi..t f'neinnon,,5 I i.n,i-n,I nr al,l n]R,, nvnn,lnncI tim, r,.nrmrt rmf
N-lessis. P'rice, Waterhouse & Co., Public Accountants, covering the
ca pitil and revelnue accou it ts ini Alrexico h1 T Atex ica Light a
Polwver Company, L.initedc and(1 its sub1siidiarlies for the yeal en(Ie(d
December 31, 1950. \Ve have ieceiveti all the iniformation anld ex-planations wve required.
We report that ill otil' opillion the auceo inpaniyintg consolidated
balance sheet and related statements of consoli(ldttecl profit and loss,
ca:lIled sol r)IplS anmid ge'lneral reserve have b!)eelI dralan up so as toexhibit a tine anidl corlreet viewv of the state of the combined e(Oln-
tiolls for the yeal, according to tile best of oul inforimatioln and ti:e
exj)iall:ationIs given us, anid as shoiwi by tie i0ooks and tihe reports
referred to.
CLAIRKSON, GORDON & CO.,(Catrtered A ccou,tWto!ds.
FrOCONTO, CANADA,
.\Z!l AV (I I 951 1
21
T h e M e x i c a n L i g h t a n d P o w e r C o m p a n y, L i m i t e d
Incorporated under The Companies Act (Canada)
A N D I T S S U B S I D I A R Y C O M PA N I E S
I1,nX)purtie s, Ha1l,,t :,ld 1,t111ipmen('lt. :A c(, ,>t............................................... ....... SI 12,804,iO II
Ri'ditl is.i I C )lI ,n'ic s ,()lb SI I' :11( i ( ... . . . .. . . . .. . . . . ; ; 9, 4 ;42 l, 1;
~xpelic.es z(i 19 151 riemtg:ini/:litioll :,llii issue ,f inw s(ecllrities (inc/idiny e.timatu' of... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I 5 1 1 .0 9.1
.XiA'II'.AI,.S ANT) S tiliES, illcludiinig eoilstrIctlii( llI18t,eria:Il c:l. si . less ........... 4.:110.723:
(I I zil:lNr Ass :is:
( ell( l:l! !!IlI{!. . . . . . . . . . . . . . . . . . . . . . . . . . 2 . :. 4. . . . . . . .
l Iullik 1,(10 1 ill cmilmll,, :111(1 inlt.ercst :acc (lililt.s . ............................. . ..... ... . ..... ..... . .2t:i9,4 -l:i
s 2.i1:8.821
Ae mints ,,c(Jv:dl1e. Icss re st i ev ............ I... .................... 7....... -1,70I4234
AdIvalnceslil o i n pI hvi , :u ......I............u....I..... IeIuIa..................I.../..i. if; . u) . '. . 659 7192 02
(~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~ 9411;:07.;slls
P ,pzl :ii oxpen ses lId uis eii:iiieii is uIej sits . .. . . . . . . ..... ...... ........... :,i i
1olselb-curr ll( d v tlwe . ' : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 2-10.5-,:;1
\liszw llallem i>ls invu(stil(lents . .. .. .. . .. . .. .. .. .. . . ............... ............ 1-12,757 , 1,088,75,
!46.,74G,78 7,o
-U r Fr = E ! E §iRg- a WM .si
-35o L~B~J. B A L A N C E .S H E E T A S AT D9
Caiildiiin Cill' elif'l
tLI AB LI T I [ES
(.AI :TAL STI--K. GELNERtAL. !ESI;IV\E AN:) SURLUlUS: (..e Aolc !1)I'l-cfeiriedl sIi les, cilrryilng a prefeietiatn clividIendiI of .31 per sh:ne per
:1I M11lli, UMUI nfi veitti' frol' it Jatltluary} i, 19.53:, liltitle(l of] redemplltionl ,.rli(qliidtiol to $16.50 per shaie-
Authorizedl and issued 85:3,244 shalnres it par va:dhl' of $13..50 . $1 1.51 8,794
(.'C/1llonii slaires-\iitIlojzc,l a(i issued1(i 1.S77G,836 shiares nf iio pal value ............. 29,1 11806 $ 40,635_600
E:a:rilic:i Sipiplus fromii JIamilnlv 1, ] ! i5.l . I,1 9,2.55.2;. ,7 1 7 ,r,,72r
IFUNDEII) DEIBTl AXN) C/iN,S6IIT iUTIIOIN l.()ANS:
I irst NAlort,vLLgi :ti, (Sillhi.t,eri.l Trust Bolndls anuid l)cleiiture iStick (secNA'0t( 2 f' (/('foidl.'.) -
Auth.o ized - Scr ies A, I & C( ( ii. S'. c irren/cy or' eqoiv jim eleit) $41 .899,9:30- SerieS 1:) (Mexicnii curlrlccy)i .. . IsoIs 90,000,100
1 ss/ii I1 :11111 I iit,st:a (iii ISelies A, i & (' (C(US. C(1'1CyltCJ or equi iolent) ... ................ 5221 44 1 8! I 8
Ca,lidill /il e lle qli 'jlivalX t .............l....t........ 823,2:1.359
Adivaiices iinlie L oan Agreemcnts (sec A5 3tc .)-
kia:licc(s il rcsjw((.t of whliech First Ak[ortpg.c .midz COdl:tend:l Trustliwid:<! 11::t yet Is-lln:d aut De(c-l"Cel:t, l! .W,(
Initerna:tiona:l 13:ink l'or- Rleconstruc.tionl and( Developlunelit-((i.S.ciirri /i or c//illent) ............. . . .... $ 1.. .470.07.5
Nalional 1 imincierni S.A.iei anA - ( icL rlict .../r.....) Pesos 12.6zi, I99C:Il:iilia. ii illLclicy equivalelit ........ . ................. .1:3)0511
21/(J (i nih1aitive IncoUme D)eclitiire Stock (scee Nle I1)-
Auit1Iirizedl andcl issueud--(,.S, c'irrenLcy/) ........................... -I.621:-,40
C:iii:l i:iii cilllCi Y i:ijiuivnIleit .......................... 0 5,086 774 iI
ID)IE FIM ED111) IIA AXiiYiFI II:S AND. C,ONTINGENCY R{ESERI:VE: (sce A\: o5)
D)eleirrel li:il ities ............................................... I 46 ,140
IRescive fl/ c,ij ltili2lniCs .................. 4 ............. .. ' : i:4409 .5,79-1 549
( 1,11ENT LIABIiLITIES:
Accrued finannial chaiges oil Fullnled Deht aild Construction I on iSiilililiig interest Ilmi the yonir 1950 on the .Y/% Ciiniia.t.v tive ie/inoDeeltle Stock ........... ......................... ........ $ 876,531
T.11p l.se.it.ed in ...est (. . I)011,e wllld ;aarrallts .... 9....1] ............... 2 A
i\cciollts r11(d Nvages paybIle , acc:riuedl cha:rges, retilurinable depioisits niidmiovision folr taxes. ..... ................... ............... 3,91 7,541 5,0:37,92(1
IS. ;I \! ES
1Oir ilepreciation Of p,roperties (incudinig reserve for retirements aiidreplace/lieit.s proavided ii'der Mexican liiw) anid f'OI' a:imortizatioii ofriglits, firn elihises, coitn lts Mid go(i.ViI ill ....................... . 845,,463,303
F/i exchilnge (see Note 7) ........................................ i ,844,646 47,.30;
Chi bechalf of' the !3oardl: ^¢146,746,7877GEORIGE S. AilESSER{SAITII II lE. A. IIAYDON J l.irectors.
23
The Mexican Light and Power Company, LimitedAND ITS SUBSIDIARY COMPANIES
.Staitenientit of Con solidaled Prffit adloif.f.S for the Year eadedl Decemnber .31, 195) |
Y
* (,'{tto(I(/Ol!Ut ( U Ico '7't/
(;IMSS (P'ING iEENIH,l .........J....E....... ....I.....................' . i 22, 77*-, )
(IPERA'l'ING AND ()I-llI;lt E \XPIEN,SES:
1P m v l pJlll(dila s(1d .... ........ . . ............... r.........
(Op eC rlti n d : I l( r i)aiIlIteIllr:Il w( e . . . .. . ............................ . . . 1 , f /S.I 1 8
Taxes, ilo¶IudIing N\lexicnli taes o1 ilc ll) ......... . .. . ... . 2.767.SSS
PljrJviS;iol SrUl dieplelint ;i,11C, i Il(I jilrg 10.00.)000 peSoS fOIJ ICtil(illientS :1IIJd nq'd1 .aJ:C-
l -lellt S pm ided undel !"llexic'm lav; (s .. ... . ...... ............... 2.1 ̂ :ot.) . i1
iI'JioviSiOIl foI ailI tiza:ItioII oJf Iigl1ts. fl'lJll,SCS, eOIltliclItS a11id gooliwill (sC A'otc S) I 7. 68 I I 9.9 99. 1; 7 2
NEl' OP'ERAi'I N. INEVNE N. ... . 2,o()4i eJ8
INCOME I"I(.IM INVES'IMENTS AND) BANK BA LA NCES . .. .. . 7f
INCO(E1; AVAII.AIILE FIJII FINANCIAL. (CHAG.IS . . . S 2...0..209,861
FINANCIAIL (HICAGE;S ON FIIiS'FI NI TIWGAJIE 1;)10K FTN(ILtDI INO
(,oxs'rilUC"I'I(IIN 1.1ANS (Wse Vole 10) .... ........................... ...... $ 1.4.30j;.7
Less: C pitaliZC(d (iJil'lig c(JIJt.l't1icti )ll ........................... ...... 209.-40(
$ 1.221.007
IN 'I4;IIF)Sl O.N Ill.N/; 'NUU (TI-0(0K .... 1.......1 260.5. 0 1 . 111;
Ni EPl iFIl' FIJ 1111E YIAI ................. 255 .............................. 1, I ( ,255
A\ ole: T'I, be 1)5' (a ('Ceo Jrco!7J in Jd'C/l nI rc Jtnreatiol1 o f d/irc'(:tors (c.xl dlI 1inq exieculietic
ofrJtiCJ'r) 5'? K, 5.5.3 olbl?J Ic Id Ji- ll ero t iu 0)7 ( of 0 cn sel. .so0l7.itor.s (*l)1 lega(l (Idvise-S
PJ'OJ'q(J 0izatio JJ) (Io ) am loo t i;l I. pS/eCt of wlJicb 7.8 i71ellchI'1/ lII t/ll' (abo?'C (IoCcoilnt)
lull? of llood (.( laic. teifju IS. s,i l (. iC/J /1 lJ (i CI.ss'l3ile 1xric S l r 1 50.7.?0.
State,nent o,f Consolidated Earnedi Surplus for the Year eilded Deverenber 31, 1950
N E1' 1lliiJ" i'om n111iK. XI'Ali 19910. tN.lrlsfel-ledi Frmn st,:It.elioenlt, Ji J:1J* MIISIid:ItcdJ IJI it
al Id Io.SS .. $... . . . . . . . . 1, 91 19.255
IAI(.AN.'I. Al F)l (I.MISER 31. 1 950 . .. ... . . S l.I 1!9,255
Staltemienit of Carnsolidaite(d Gerieral Reserve for the Year eialted December .31, 1950
BALANCE Al' DI'C(.E:N !BEt 31, 1949. .ftell JiOJIgilig tllCICt.J) tile (icITit acculnuIII)ItJOd t(l
tilat date ...... .... 7. ............. $........ S ,008.779
ADD AD.I USTNENT!`S A 1(15NO I(;'' IF 1 95( 1'! tlN OT AuRAX(l;E1IENTF:
linteiest ;cJumlnII)i)Jtedi to ID)eleilllr :31, I949! (/i/-2i%') (JI thl (1%,0 0Jnl(l:otiVe
InCOnIIe I)ebJeultuie IStJ)k, cn:clllediI uII;el' tile l'iall .......... 8 i0,D4(i
Exess if llt e,iiiiiiilt it at wic1llHiet pI'iJoiusly existilIg iljst MJllJtgage o.iJligattimlis
olt thc C'ollip.ivally:ul its sn!-: ndais l t!wc Slelomll! M/!Dtl,a-e~ B-nd(s and!Dllebetulr; SitJ(wk IJI tlle (CJJIIIl)CIIV \N-ele Statedl ill t1lCil' :ICCJO.LItS JJ e till
Canadll(ian cui-i,ency equ|tivalent of OEle pui-incipl atinmuint o:f tlle nleov s(ecm-iti(esissueci in exchallg e (I iie tile Hiall .................... 09............1..4 I), 4 9 2,09
BALANCE AT DECENMIJEE 31, 1950I. .. ..Sl,4201870
/ 14
T he M e xi can Li g h t and Pow e r Co m p any, LimitedAND 'TS' SSUBS-DI ARY CO MPAN!ES
L Notes to Fianarci.l Statenaent.s.
t. (CO)NVERSYIX )F iORElIN C'UlRENCl.I:S.
Assets aiiid liabilities :al revlellues :111(1 expellses ill cili'eilcis other tlhaii Can:ainni: :aC coliverted ilitolnalian f iidl(ls oil the followiltg l) ases:
Ciurreilt; issets, otielr :assCts aii(l Ic lrlt an(l jdeferred( liatilities -At tie cutirrenlt rate o:)f exeialige at
Exlp)Cil(dituiles Oil prlo)peties. ialllt and equlip)miielit aild iivenltolries of materials aind suipplies-at the ratesof ex(iajige in effect niwehi tue expeindituies were riade.
ConIstrucetioiln lo)ails a ie 1 Series 13 Fi st IVM rtgage aind (Collateral 'V tist 1Bo11nis issmied in resp ect tlielieof-atthe rates (if exchallge in eff-ect when tile fuin(is were boriowed.
Seties A F'il st A\lortgage and- C(o11ateratl rnUSt Bow lls antld cibentutre Stock Series C' Firist Mkiortgage a indiCollateral 'irst r 31 Bndis a nd 53/4"%, Cumu lin Iative ITnllionie D)ebentu re StI ck-at the rate in foiceT at the dateIll issule.
Reveliiies a.iid expelises oin (ll cperlttiolis ill Nlexico and froil traillsactillIS ill cierreieies-at exciiaiigerltes Prevailinlg (1iirilig the Yeal.
2. I)E'1AILS oF- VMsi,[ NI'10RT.A:G ENI) A oN.i.COA'I'rE.lAi Titsl'i' I3ONDS AND D)FEIBEN'FURE STUC(K SHOWN IN iIALANCIE
S II E l'Y. A ittht/iZe(l Is.t Izd
I.. (S''. C(In. Cy.
5% Series A Sinikiiig Fu1 d 13on1dIlls ai id D)ebentill e Stock d1uc 1 975*. Etlli'val/lt El/l)OinivIen
Auitll orize(l (U;.S. currenc t o o mlt i d) ..... .............. S1o, 0o .i it. 9;t
Issiiedi-miIIer I'Laii of Arrangelelllit lbearig interest. frIlFcliuaixi 1, 1!;50
Pa :lllhe in i rnY .. ....... ..lr.len...... I9,55021 0 S 9,55(,210 $10,50)5,231
D. : le in tii. CIi;t4 11! \,Ijh.7 "th no mol),) , in
Optit 01)1 i;; (1:)d I';l xclJ-(ci.dt Sq holdhrs; off rtifer
PochI-tical bonds) .............................. 79012692 9711, i9 ' I, 692
1 1 ),69.93( $1 1 .406,92341 2% Series Ii Serial 13B1oIs (iCe I 953-75.
(;ual-Nnibted ul lco(,ldfitionit-11ll a, to, play;lien;t ;of pr;i;ncipa:l :nd
interest by tile Unitedl lexilill Statess. ClIiilissiolln of VI of10/ per annu11m1111 payable tol the UJiited Miexicall States isGuaran:lttor-
Authorized (Uli.S. currncI t)r e/uirlent) .................... 26,000,000Isstleil to (late ii Cesple(At. of alIvalnces m111der Loal Agieelienit
will iteriintional Bank for Reco nstiiutiotn :ila( D)evelolp-
I'ayabw)le ill U.S. e ................. 11111
Payable iii Canadian curreti ................ 164,500 5,541,968 5,723,43(i
5J Series C Sinkinig Funid l3oi I(s (lne 197.5 Colininissiol of 1%p:yaylle to Comisioll FI'cleral (Ide Electricidad.Auth0lniZed-( U.S. eur r enCy)) ....... ..................... 5,530,000Issuecl-to) Conlisioii Federal Ice Electricidlad bearinig iiiterestfi-o,li Fcl,.I1 950, 1 iisettIelielest,67loi(f.,.-O U.Q. 5 3 0, 0 00 610(832,000K11 10.I .,1,II WIUIuIIO u 0 1 6 U/' 1 o 11 II o ,J.,4.JU,UUU IT .0 , .1'' , Q,1 '.
lotal alithoiilized-Series A, 13 and C .... ... ....... $4.1, 99,9930)
Scries iI) Serial Bonds diue 195-3-75 (interest oto to exCceed 7%).
Authorized - (M1exic(n currency) ................... Pesols 90,000,001)lsel...............................................
(7% bonds itci, to 44,000,000 pesos (tre issuitile to refundl' a(ldvances
for construction received or to be received undrer Loan AIgree-I)teC)t ivitI, N(acion.al Financiera, S.A.)
Total BIols alld )Cbehnttuie Sto(k issued at I1)eccmiber:31 1950 .. 1-21l 898 $23,213.359
25
3. I)ETAI'II.S IlF" AIIVAN12ES UNIEI l.(.)AN A(HI:EMI'INTS SH(OWN IN IIAI.AN( E SHEEt;T.
UIiC"[t I(1'e(ia/. G I Cy.¶(4iIm4an A,greincnt Nk itli Intern:timAl lsaiz; i <,k F(w e('('lruc'tiUlnI( nid('D'v'lll)l)lwlt.
I I- I7ti t- I oeiI .. ........ ... ....... . . -1.1)()lI,(-.)()
A N 1v 1 AI I to ' )HA (i E I) : r I 50 i(C I I I.N ( )ill dI.J. II (IN.lI I i es ............ 77012,04:1
SL eiteslT31 i::rs th 1it1age i.ad171t111 it rdalTrist fl' eolstl ldtt;O 1B(a Deke.lA Nt I") S2:51 .4 1 ,9ilt 17
O.I' 0 I YI'7I'7• I'l ,SIN .INI SE I A IA III PAYMENITS.
13alal)(.e (l adva:llves ill resp)ect o.) whichel Series i5 NIldOII(S t vet i~ssillcd.... SP 1,47().07#5 i 1,). )2
IlelISlOll~~ ~~~~~~~~~~~~~~~~~~~~~~~ie:ill fIlIUII illfI
imant1 Ag)'mcCl(('t N\\ith Nac(ional:i Flinz:invier.-t, S.A.
Ic t.ll 1( tli ............. (. l. .it . . ..0 . ...... I 1 s()) s 4 i 11 11 011
Advanced too 1 tle ltn er ;) I, 19 l0 ... . .. . .... .t.. ....... ...... . Pe so t 1I' 2i t ,l I 91 fl' IT-IO t-i 9
A.-; shso\%- it in:dae Slhceet ..................... I. ............ . .l............. )1 i
It. FEINAENCIAI1 (HAR1GES DUI:IN(. A)NS'I'ICT )N.
I liter'(st ;nd 1.( I i'Ol1ll 11101 I):npi (InI b(1r1'Xwings foi- constrction l purp I s(s Lr I lltpO, 1ita.lize(dI (III lI)l' OI theO' plrlloI (fI
ticx:t :H I'tg(1I (\If tile;J:t12 III Hl;ll!le' V!tiS Illtite (' !I'll the ClJit.i 'II:!"C01 tP ! 11(1bIH'!!"I\\'!12 :l(l1(0lOt!!! i.,, tle(' ((lOS'll lily 5e0ngIreci5.1121 elflpii( l )'VliI IPI'2''tIl o tii Y111 910 1 e 1T.ppiI:lwn (If tileS 1)1211 1, ci'tI .II..itit21
till :1Sigltio SfIIIalchI s t'il:l'gS c(Io it(lliZed lIP iIi1)g tfl:0 w'S Si2l09,l40(i 1h:it4h Ippcq 11:s ill the Itro'i)t :ld I (J.S
Acu.nt. as a deducIIti.on i.m the tot.::i rinmi1i. c.arg'es tor. the year.
Insterest is lso. ecapitallizedl ilbl espect tIf e owistr:et.ionl iillalleed w\ith(at!trc(oull'S( tof lmrrlowVims. Il slts ll e;aesthe( Capiltalized( I!ltere(St is Crei'tedlt' to th(' reserve'( fOI' (lpel)lc('ll!mlI. I lie a:imil0111 SO cre'('(teT(l( Ill 1 !1')l \\:I .>. Z
: '!!!(iVVV-'!' P'lEN.IONS AYI) S-EV'lA'lAT(N PA\YMINTS.
Underl S!l((''('SSiv'( labIoiI ollticrtts, tile Cm01ipall' hlas lbe(ll a:11(l iS ()bilgatcd( to g:twalt retireme clit penIsionls t6:iIlphlyce whoCC \\ir ''til'( duril'l"'. tl:e period() o theC ('Oltr"t(t and( t,o) make :: (,er:t.ainsas: pnovisio1l} ill its a('c'lits
iO'w p(';lSi"iO IMI lelItS :!((;III'(li; ill i:av lt' ir tl W V> Lelw F1 1111(.lle 1MV le te ('0111pll) ly X\n-s :1114 i., mmsig:nt(l Iill(ieleach cl(olitr:a(t to) payX separ:i:tiolt 1l>\ll ( Ah sc t(I 0111pl.,.yees A t-ile t.ime z>11 retirelienlt. dea:thl ol1 w\ithllZllw:d l':i- 0111 the
'Ilile ha:tl:nve (If the( accl (lwi:ite(I( pn)vzisi(lms I'm. po(llsionll requille(I 11(1der thef Od{lec'Xtive( Cotraclt!:(s isil(hltide(t in the lbal:mcc sheet ill tile it,(.ll (If Dleferredl Lialhilities.
Addf itionlal pl'O\iSiOIIS fi()l fittul- paymlenlts we(''' llr ('t Iad fii(IIl)i Det ine 31 1.)4! ;11 atccOrdLate wvith t!le ter 1s
,,r the 194-1 Suple>llientl(:1; Truwst, Deedls (i:nch:idil- S664,60 pr0t)v[luided il: 1()4!)) andI ;IIIt sm l)I\;;OI pr\(vsim were mad
I'- om yeIIC\arSs prior therebts. At D)(ecenIwr :31, 1949( thlese prmoisi()lls w\ere} l -nnserred( tOi :1 r(Mesre fin. vowtill-
:1I(ZS II11(i I(I I :!(I(Ic addt&(ional1)( ;S;(i!I S I l v b1e\ ilg" 111ndeI Since i\ ll thle oplilli(ull (If tile 1.3(lard{ (if D)irectorlSth!e I tar;!1S. tO, \v!il(_-!.tI 'l!L)ll R I; [( !! ! heI !l SI\ Of t!1C Fl-A i 1eT ! ; ! i( I rS ! . Se X l !dl!!!Pf>}!I'm- tile reum-ery (If' f'ttiirc p:avnieits,ot (.llt ful'turzTe rCevnties.
6. ( (0AINIFI'.MLF:iNT6' FO()l CA:'I'I'Al. I'XP'lNl)IT!llES.'Ilicte :nre cwllnl!litilllcnts~ ill resp)ect ,, 1) cnIPt:l exp)end(itures ammlI)tltill" '' ( app)IlOX\lli:ttek\ *t;I-1.((,80HI0 ;..o)
wi h;(h1 :pI imJ( n jil lyIT l\ 14. -X.)));{; \\;1 I) -(tl) IE 1!} 1;.; .;.ile I;t~.S _i :;;1a I., I.I_ ... X l 1 ,1;:1: \___ ....:l -:t.
wi t!h t!lC 1TrlltIII:t;OI1;1 Ba;Ik I)mI Rsee.onstrucetioml andz D)evehipmlent and( Nac0jimi:l FqinTancier:[ S,A.
7 t:I:I . 14(SEVP]FO E-.CiSAN(;]--,There,( has been nlo, chaiwue ill tlhis reserve (1111'im," 1!):}) 1. I,iel)lCSCIItS tl1C hn\!lance at thle ed(ofS10 1!)4!) 0f
CX,.!,:O,,e rio-d'(itts t'(latilg t., (]lefe!CT 1;e" fahlli;;ic's \\1;;(, ,:;.:,"S(.,S a ;S;;It, OIf the dlecl:ne ;11 th:( vn:ito (;f t!,(PeSO
8. IDEPRECI.(IATION ANI) tAMIT)It'ZAT''ON.
1)1(11I 1 195g l(),r; a ea:efUIl StU(Id\ (If the( (OIlpIally's depreI)I( :t,imi requirjelinellts, ina:de by0 thie C'oin:paiivRts eClwi-
1werfls. illd iiCte (t thlat tllc lii'c ,or tile va:rious r]lass( s (tIf' pI)(wrt}r w\\Il b R11e bm'-ej.rc th:all tlh;t P:e\v;OIIS1V estil:imtledal lliii T, I'l( 9lle Iep (i:nu l) r:aes Ill I( c',--.. -Icc(If-.linigly b>I)liumj-al:X l(m\Ul M;1tN, (;,U,I-II JR1 g 1115::111;A! t
tih' av erto(le Of tlle r:ttes IlSe(1 bv elee trie (itilities ill thle Uniit.cfl State's and( e(:)isideredl ad1eqluate by\ tile Cm11pIINr:l:yS
C:1g;11eerS, \Vel(l app)ied( jill pr()v-id!il ll)!C depecition! foi- tile yearl i 950(. Th app 1!;lica:tion: (If tilesc n)ew r:t(es resl!lt(edill a1 siitysmllaer depreceiationl eharvie in15thll i ll-( !lt : 1()49, \$jZ. SD2,13-1319 comXp:nredl witi S2,278,:31)l)
llotwith)stalid(inig tile :ndd(iti(onl:t pnip)lerty which] b(ctu-ne( Slli);('(t t()ol depre(ti:tiolil ill 19.)0
AS :Ig:lillSt thIc le(tLI:tioll ill tile d.epreciattiol charge, tlhere wnis iinatugUlate(i iln 195-)( anl annulla prIO'SiOI:
Of $1.37,681I foi- amriotizattionl (If the boeok valule of r-igl:ts, franch!ises, conltractS" a!1)(! gvwdwdvl. While nlo prm-isioll
fo:r alliltizat;:tOim (Ad thu(se ;iltall"FibIe asjets \wi1s ;il;a.d p;rior tOi 191.50, t!1( aforincl;e;,t9;;:;d St::h(!y(f depre(l:;tjiI"
r(e(flircinclits illade durilig the year by the Companvy's eIgilieceis indicates thit, oil the_ basis of thoe oevlxa:idoptedi depreciatioi rates, tlle 1euiUiaOdte reseive is sufficieiit to (c(VerI :1ai0ortiz:itioll of iiitnitgible :Issets tiilte as wei asiepdeein iII of properties.
Il i(ler the LimW of the lie Ilie 1 niiistrx' 0f Alexieo, aln aliilal provision; for retirellnsi iits and( repiaceliemets 'ip~~~~~~~~~ er1it( WI a- ;10. I;eii( e; p- l",S f(r.aep poss Iis ;;]I I l;a I plrovision; ;; 1; icx h h;as h(e cnfi;e, I fI t) tl;e C(; i;;; n!a l
at 10,000,000 pesos for te five-yeal (I 1 iirattion of the presenit rates, is treated iii the (C5i;oj p ilmy's ilinii neai state-InelntS :IS oiniliig part of' the depreciation PIOvisiOII.
9. PAYMENT TO AMEXICAN (GOVEIN.MENT ItE rEOPERTIES.
ITl(e 1 i\ of, the lEleetrie Industry aid its regulations Provide that tle eiectrie ecoillnmlnies :re reqIlired toniiike it anno ,i p iynienit to the Covernmlellt of 2% of the valiue of thieir properties :s estahlished for rate lla iflgpurpioses excluhding the permianiient hyidrauilie works.
The (xerlinlent iavy however waive this obdligitioi, ill whole or iln plrt, wiiell fixing tih rats ,,for theeieetric (clIlipanies iii orler to IOiIiiiiiize the inlrease in tue eost of electricity t,i the consmilersi Ill wco li lallctlerewlill Zwi!n ti, C11 ipll),li'S .5( dinitive mlt.eS wree fijX( i ; ioivr I !)-10, ftIe I n;.xli_ leiIei Ii!!l wa:!ve (for the 5-veur doUrII I of SlIill rates, onle half of tile aforesaid 2% alIlnl:li lpayllileit.
'rite i,:i\\n of tihe lie Iiiilistry lriii its regulationis further provide t!at the ahove-loeltioled(l yearlyollig;atioll x\ii he bC waived ill iolei it If is provel th.tt the rate of returln oltailned hv t!e C(onipally for the veal:tIliteCi Considleratioln dioe s 1lot rieacih that lixeti by) the Tariff Commnissioii as the basis for the (Con'pal)Iy's riates; aI(Ii11 ;;hl;cl (;r il1 p.i;t to '-the exte;i-t tl;ts;lh,vieit;o;' ei;ete X;pn';;; fre;;lleovti;iixed Ixv the Taliff Commni;ssion.
|Iuioii]rtlf flp t 1'e I ().'A1i t,ie' ( nosoIA)ll OX {enI'Iirois lodvef nt](t been] snifiien(t to u! )i'nohf l'l:ll('l (t. of l 11!) o't ofr t.i)fe
I 0C,othierwise pay! i ie (ailiuk ;lnting to 6i 72,;i2) . Ac(cordinigly 1io paym;e;nt has heel mlde or provided for il theaccotilitS 11(l the (Colipl)ly hias addlresse(l the reqcuirecd formal request to tile Goiyernilnenlt fol colIfirmatiolI flitI10 anltUlilt is pyaoiiic In respe(Tt o1 tile Year I950
10. FINANCIAL CHAiIRGES.
'I'he amioulit of $1 ,43ff,i47 shown ill the P'rofit aiidI Loss Account as tile gross fil :ieiail chiiar-gesdrling 1950 (h(efore (ll(IluCtiog chtarges cnpitalizedl) on tlme First Mlortgage deit illwhidig .ioistiiie-1t.in lwos i;R T1*iIll 11 !a fofll,owv
*im ("Y.
Interest for the inolithi of JanulIaI ]'95(f oll the foriliel First Mlortgage 1ondis of 'I'lTe Alexican AP'iiol'10/,11Light 1(li Plower Co(nxpaliy, Limiiiteil, The Aexicali l.lectric Light L (h 1 Co1)pally .il lifteCl :m1d(Pachullca Lightl iiad Power Comp:mIIIv wxicihi wvere exhln nge(l d under the Phila of A rram, ( tllllltfor S4privs AI irSt \lotgli+g *1 oi l Collter TI rust. Bondls and 1)(i(ntnre Stovk of T1he1 AM'xi-canl light alid Power ColmpalnyV. Lilited . 47.. 7 S
Iliterest f'ori the eleveln monliths elile(l lDecellmber 31, l95() on Series A First Axlortgage andiCollaIteCral Trust 130115 at(is I)eeeltture Stock... f-1,59)
Iltelest anId ComioIIlssionI for tl;e eleveil iIIoiitlis eiidcd Delcemlbhr 31 I1950 oll Series C Firstvhitaliortu,e :1.1d C olltrlTr'is fisin(i5..s .2.i .i.i . ...
Ilterlest for 1950 oil Collstrulltioll Loalls all(l iterest 11(l coimillissioI (i oll Series 1B First Alort-gage lic! ' a!atel ! 'Trust Bmlids' is-u-1 -l spec t thereof! .ti . . ........
Co(.l1limitillll ellthre fiiol 9 tn 111 1( iwn xi :t ilotinlt of constrluctionl dioi liar ((c llits. 1, 4-9t3
430, I -:l l7l
1I. I1lsriuCTIOXS UNDER AGIREEMENT WITH TIIE INTERNATIONAL 13ANK FORl R{ECONSTIIUCTION ANI) D)EV'ELOPI-M EN I .
Ud(!er the provisions (of the Loani Agreemiient datedi April 28, 1 950 with the iiterinatioinal hBanik fOr RecoIl-5tr ltil (Iii1d 1)w'('Plo 01'lte t XI s!i ginvtw l ) C thle Companyfix I!s indodrta.ke, :!Ii()g other th!ioiosi tlitmiiless the lBank shall otiherwise agree-
(it) it xwiil not fa' dividenlds (other thani stock dlividlenids) O0i make otlier distribuitiolins oi allny ShaeCres if itscapital stock except out of consolidated iiet inicome earned subseqituenit to December 31, 19ff49;
(b) it xvill nOt pay divicienldis or make other distributions on any shares of its capital stock iiiitil the voil-striuctioll pr(i .1(mg ille h:is beeii coplll etedi ani( the local cu11rrency costs thereof anidi aiiy inidehtei.lless ilexcess of 50,000,000 pesos cont-lacted for the purpose of payin-g Such local currency costs sliahl have enCII
.Si i or, ofrovviled for oult .,f PIOSS olelerati 11 a receintS amnd
(c) it Will nOt reIeeIm o1 pJrIIchase any of its capital stock or of its 512% Cum-1ulatiVe III(OIIIC Del)entlureStock (except ts such 5l•% C(umulative Income D)ebeiture Stock shaidl be retilerl throuiglh operatioln of thesinkinig fulii(i to Lie proviided therefor), exeept out of the proceedis of the saie of caplital stock aindl, ill tile case(f thc 51 2% CUiiiUllitiiVe iICIICe De)benituie Stock, olit of thie plroceedIs of the sale of i ncomie dceieltlrestock !ha\viigernis nO ore tfavOIurabe to the ders Ft..e..!b cS k
2 7
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QUERETARO 'o ) , ,' VR RI '#> > / , i VERAkCRILJZ
HIDALGC) Om /NECAXA
TEPEXICN CANADA PACHUCA TEZCA
-' F; \._.w^\ JUANDO PATLA
ZCAP-~ / \ ou_ _ {(PROJECT) j
/- A / ;LR /MA
N! s t() / #t j P'UE BLA XMEXICO
KRO TLILAN 20-C' / 1,J¢F ) ~~~~~~~~~~~~~F. LE'AL OS^yS goop ook- %01..J- . 1'
ANG;ANGUEO '0 LECHER IA ER OD
ANC;ANGIO -s W S NONOALCC O TIAXCALA*1' TACUDAYA ~~~~~~~~~~~~~~~~~~~~~~~~~SYSTEM COF7 0 MEXICO THE MEXIICAN LIGHT & POWIER CO. LTI
* ~ C i,,TOLLC0 .Cly AND SUEBSIDIARY COMPANIES
IXTAPANTONG0lGENERAIING PLANTS* IPq**;ANTONGOUZ---- \ J; D.F. i \rwAr CAPCrTY K W.
J / STA. BARBARA) * o* HYDROELECTIIIC
_ ' (EL DURAZNO CFE. PROJECT QS B, A RTOLONECAXA 1115,000SN. BARTOLO1 *~~~~~~.i a 4TEPEXIC 45,000
: )TEMASCAILTEPEC: IV ZICTEPEC 0 I ..|* TEZCAPA 5,367
S ZEPAYAUITLAt I6"? 3 LERMA 79,945p ZEPAYAUTLA ) I CUERNAVAICA * *- VILLADA 19280
j J S. SIMONITO dE FERNANDEZ LEAL 1,280U g ALAMEDA LAS FUENTES TIIAN 680/ * * Jt JUANDO 3,600
A CANADA 1,215/. f '*+ i (-1' AtAAMAEDDAA 8 288o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AAMDA8,8
LAS FUENTE:S 264
MOR~IEIL'4 .". TEMASCALTIEPEC233
C40RONA YS LEGEND ZICI'EPEC 384transmission lines ~~~~~~ZEPAYALITLA 664
Existing treasmision lines and S. SIMON 1,700IL... generating stations of Companies-- Black IXTAPANTONGO C.F.E.) 55,80CI
TAXC.O ProDposed ltransmission lines and TOTAL HYDROELECTRIC 323,3954- N. . *1 generating station; of Companies -- Red THERMiOELECI'RIC
A > *~ jExisting transmission line and NONOALCO 80,000%~~* s .**generating, station of Coamkion TACUBAYA 30,900
(GU ERRERCO Federal detB ectricidad Green TOTrAL THERMOELECTRIC 110,90(
