#1Mrt₺rt ta CFE Comisión Federal de ElectricidadⓇ Investor Presentation May 2018#2Table of Contents 1. CFE General Information and Operations Update 2. Business Plan 3. Financial Results 4. Annexes CFE Comisión Federal de ElectricidadⓇ 1#3Mrttrtta CFE Comisión Federal de Electricidad® CFE 1. CFE General Information and Operations Update#4Company Snapshot Subsidiary CFE Comisión Federal de ElectricidadⓇ Affiliate Business Unit CFE Internacional Affiliate Q markets Distribution in international CFEnergía Affiliate Distribution in local markets Intermediation of Legacy Contracts Affiliate Administration of contracts created under the former regulation Qualified Supply Affiliate Electrical service to high- consuming clients, such as industrial sector clients, at non-regulated rates Generation Q Six generation subsidiaries and one business unit of the Laguna Verde nuclear power plant Private generators participate through CFE via PIE4 contracts, in auctions or directly in the MEM5 4 CFE Basic Supply Subsidiary Electrical service at regulated rates 4 Transmission CFE Capital Affiliate Investments in energy infrastructure 88 Nuclear Generation Business Unit HOAA у 6 Generation Subsidiaries Transmission Subsidiary CFE Telecom Business Unit Distribution Subsidiary 1 Exclusive to CFE according to the Mexican Constitution Key Highlights¹ Generates ~78% of electrical energy consumption in Mexico² NOAA Total installed capacity of 55,240 MW ~107,161km of transmission & sub-transmission³ lines Provides electricity to -98.65% of the Mexican population ** 42.5mn of Distribution customers 4 Total revenues of MXN$93.1bn 4 Total assets of MXN$1,534.1bn CFE Transmisión receives income from CENACE6 at a regulated rate established by CRE There are transmission lines owned by other players connecting a power plant to CFE networks. # Distribution CFE Distribution is the only authorized carrier to carry out the electric power distribution service in the General Distribution Networks Supply Supply is carried out very closely with the distribution, as it includes the billing and collection of the energy that reaches each user through the distribution networks Commercialization After the Energy Reform, CFE created a new fuel commercialization business through its subsidiaries CFEnergía and CFE Internacional. ¹Numbers as of March 31 2018, 2 Includes Independent Energy Producers ("IEP") and external plants; the remaining 22% corresponds to electricity generated by self-suppliers and cogenerators in 1Q18.3 The transmission lines carry a high voltage that goes from 161kV to 400 kV 4 Independent Energy Producers, 5 "Mexican Electirc Market"- Wholesale Electricity Market, 6 Centro Nacional de Control de Energía, 7 Comisión Reguladora de Energía Source: CFE 3#5Mexico's Energy Industry Market Dynamics Generation¹ CFE f t t x Generation Subsidiaries Private Generators (≥0.5MW) cenace Certe Nocional de Cool Energi Independent Operator and Payment Processor Wholesale Electricity Market ("MEM") Medium and Long Term Auctions and Capacity Auctions² Energy Spot Market Clean Energy Certificates ("CECS") Suppliers CFE Basic Suppliers³ Other Products Capacity Qualified Suppliers CFE & Private Regulated Tariffs Market Prices CFE Comisión Federal de ElectricidadⓇ End Users Basic Users Qualified Users (>1 MW) Bilateral Contracts ee ee Transmission CFE Subsidiary Regulated Tariffs CRE COMISION REGULADORA DE ENERGIA Distribution CFE Subsidiary 半 CENACE4 acts as an intermediary for the transactions that are carried out between market participants in the WEM Market Participants pay transmission and regulated distribution fees established by the CRE for electricity distributed through the National Transmission Network and the General Distribution Network ("GDN") Supply to the final users under the Basic Supply Service ("BSS") is carried out under a regulated tariff regime Private companies can sell electricity to Qualified Users under supply contracts Source: CFE 1 The Power Plants under the previous regime (Ley del Servicio Público de Energía Eléctrica) are included in the Legacy Contracts Intermediation Subsidiary and include the figures for self-supply, cogeneration, among others. 2 The Medium and Long Term auctions for Energy, Electricity and CECs Contracts are organized by CENACE based on the needs of the Basic Suppliers. 3 CFE is currently the only Basic Supplier, but any other participant could request a permit from CRE to provide such service. 4 Centro Nacional de Control de Energía ("CENACE").#6The Transmission and Distribution businesses represent a stable and predictable source of income for CFE, making them highly strategic CFE Comisión Federal de Electricidad USA 1300 USA (IMPERIAL V.) National Transmission Network DAÑO HRCO TOC/ TUL GPM PMX O OLFG APA ° TIZ ° HILL PRD ITE CFE Comisión Federal de ElectricidadⓇ National coverage through 9 offices covering 55 zones. 020O יט LOY 6 OTVE OSA PEH QSON (USA) (USA) DIABLO AZCARATE о O SYL ON FIC O A ADUQ STS Loc COMC OLEN AVI OGUN CYCO OMN CNC BAN BIC A PALO MULO CHOOS SIMBOLOGÍA 1CHAU CHU ENO Ο Bru CMU KMC ACE O BAO TCM OA PYC ARX O MAN IROO NEC PHC JRB cff E VAE TUV EVDO VIC сто VAJ CF OTSU CEY CRO AVDF PNNA ECA PBD AMP (U.S.A) ° CFDO OAT ETMO BOX TEX AM2T KCRO CPM ATK NOP OLVE JLC XAL AUA OC PIE O MOO ° REM OPEN CHNO OMAD CPAP MPT OIXL MDO DVA O HOL OCTD Y EROGE PEVEIR AUR ARA OZAR AYO NAVO Voo EST O TEH BNG C Old VER NUO MUN O 18 ONL BRO TO O MAGA хосо CRU AQU FRO LAM RAI (Sharyland) FOR AUC PFT TOLO TO ve (EAP σOLI OCRB OPDB ACOA RM AX AHEX ESC PAM FOGAR MORO TOP ATE TIA си MYA AND RAP NAZO 300 CM MCA LED Dog! SLR MZD PNQO SMTP JEP 10116 JOM CHK PMY 150 ww LLCO QUIE EPS GUE OLV NO SUPO SLUO AT AGM LYE KO ITCA ORGE ALS LOW VR-OLIT VATC CRY PAE SJU VOE QA ALT TECCB ZPO BA MES VTRO TUH TUOTUVOMIA CMU DETALLE DEL AREA METROPOLITANA D CIUDAD DE MÉXICO о CENTRAL GENERADORA CENTRAL BOLICA CENTRAL FOTOVOLTAICA SUBESTACIÓN ATO CABA STIL SMD MAN LINEA DE 400 KV OCTA CEL 200 O ANET AIX AV QUPP I LT FUTURA DE 500 KV HVDC AIBOHEXA ōna Ov LT AISLADAS EN 400 KV OPERANDO EN 230 MAM A CUP MFA TPX I KEA DE 230 KV CABLE DE 230 KV LINEA DE 161, 138 KV LINEA DE 115, 69 KV CABLE DE 115 LINEA DE 34.5 KV CABLE DE 34.5 KV COL 1610 OL & TO VILA ெ LOP NKS OLAI смор LACO O LIND Out gu AUL ESA о INS TSP PO POM JO MUT SABANG THP LBR BELICE ~107,161 km of transmission and sub-transmission lines covering the 32 Federal Entities of the United Mexican States ~832,514 km of distribution lines 13 International connections As of March 31, de 2018. Source: CFE The transmission and sub- transmission lines represent 2.5x the circumference of the Earth 5#7Costumer Base and Installed Capacity Evolution Customer Accounts (millions) In 1Q2018 we increased our customers base to 42.5 million from 42.2 million accounts in 4Q2017. CFE Comisión Federal de ElectricidadⓇ Installed Capacity (MW) Four old generation units of our geothermal plant Cerro Prieto were permanently closed. For that reason, installed capacity was reduced from 55,891 MW in 2017 to 55,240 MW in 1Q2018. 6.8 4.9 12 18.7 34.2 42.2 42.5 40.8 13,692 5,401 24,442 35,869 55,564 55,891 55,240 51,611 1970 1980 1990 2000 2010 2016 2017 1Q2018 1970 1980 1990 2000 2010 2016 2017 1Q2018 Source: CFE#8Installed Capacity by Energy Source CFE's Transition Towards Cleaner Generation of Electricity Towards Cleane neration of Electro In 1Q2018, clean technologies reached 27.7% of total installed capacity. Natural Gas (IPP*) 22.9% Diesel & Natural Gas 0.4% Fuel Oil & Natural *Independent Power Producers Gas 8.9% Diesel 1.9% Coal Total Clean Technologies 27.7% • • 9.7% Natural Gas 20.1% Fuel Oil 8.4% • CFE Comisión Federal de ElectricidadⓇ Hydroelectric Nuclear Wind Efficient cogeneration Geothermal • Bioenergy . Photovoltaic 7#9The national clean energy goals are established in the Energy Transition Law Transition att Less polluting energy Fossil Fuels 72.3% 2018 1T Clean 27.7% 1 Source: https://www.gob.mx/cms/uploads/attachment/file/325634/Electricity_Sector_Outlook 2017-2031.pdf Fossil Fuels 65.0% CFE Comisión Federal de ElectricidadⓇ More clean energy 2024 Clean 35.0%#10Mrttrtta CFE Comisión Federal de Electricidad® 2. Business Plan#11CFE's transformation plan after the Energy Reform consists of three phases onsists of three phases Phase I 2015-2016 Construction (Completed) Rethinking structural conditions and capturing more thorough and evident improvement opportunities. Take advantage of the regulation opportunity window. Phase II 2017-2018 CFE Comisión Federal de ElectricidadⓇ Phase III 2019 onwards Consolidate Consolidate into a New Operating Model Achieve new performance and cost reduction levels. Develop the portfolio. Supply and transportation of Gas as a new expansion area. Compete Accelerate growth in gas distribution. Expand the growth vectors outside the core business area. Sustain standards with continuous improvement. 4 We are working on transforming the culture to a customer-oriented and competitive focused environment 4 In this phase, CFE will focus on achieving the full adoption of the new operating model, continuing to strengthen the balance sheet, the use of technology to support productivity and customer service, and strengthening management teams and key functions for the operating model. 10#122018: Key Action Plan CFE Comisión Federal de ElectricidadⓇ Consolidate the New Operational Model and develop a productive business culture with effective talent management ✪ Achieve the Productivity and Cost Control objectives that allow CFE reach the next level of performance and cost base levels 7 Strategic Priorities 1. Operational Model, Talent and Culture 2. Regulatory Agenda 3. Maximizing the value of gas pipelines Continue developing the business portfolio towards greater profitability and balance sheet strength 4. Strengthening the Balance Sheet 5. Financial and Market Risk Management 6. Productivity and Cost Control Begin with the gas distribution & transportation plans to maximize the gas pipeline network value 7. Digital transformation Source: CFE 11#132018-2022 Investment Plan CFE expects that its total capital investments related to the Investment Plan will amount to MXN $327 billion for the 2018-2022 period and will be allocated as follows: • . Generation Up to MXN $148 billion investment. Increase capacity by more than 8 GW. The above, represents an approximately 14% increase against December 2017. Transmission Up to MXN $99 billion investment for: ➤ Expand and Modernize the National Transmission Network Improve operational efficiency and maintenance Distribution Up to MXN $71 billion investment for: Growing and modernizing an intelligent network. Reduce technical losses. Maximize operational efficiency. Other 148 99 CFE Comisión Federal de ElectricidadⓇ 71 9 • Up to MXN $9 billion investment to Basic Supply and Telecommunications Generation Transmission Distribution Other 12#14Strategic Vision CFE's Goal Key initiatives for business turnaround Strategic Pillars CFE Comisión Federal de ElectricidadⓇ . Be a role model State Owned Enterprise energy company committed to its client base, looking for attractive profitability opportunities and financial solidity, and being sustainable and responsible with the environment Optimized and profitable business portfolio with a focus on investments Generation Transmission and distribution Increasing profitability and competitiveness of portfolio Develop transmission and distribution as core businesses Generation park optimization Efficient operation of the power plants Leverage of private capital Reduction of technical and non- technical losses Operation and maintenance efficiency Intelligent network development, growth and modernization Supply Utilize supply as a growth vector Comprehensive value proposition by customer segment prioritization Gas transportation and distribution Commercial capacities development Financial structure New Operational Model Cost reduction and higher productivity Proactive regulatory strategy Source: 2017-2021 Business Plan http://www.cfe.gob.mx/inversionistas/SiteCollection Documents/Plande Negocios.pd Social responsibility and the environment Technology Safety and well- being of the workforce 13#15Recent Achievements 25% additional net indebtedness exercised with respect to the authorized MXN $ billions 12,500 10,000 7,463 2016a authorized 2017a authorized 2017e exercised CFE Comisión Federal de ElectricidadⓇ Effective response to 10 natural phenomena 3 earthquakes, 3 hurricanes y 4 storms that affected the service of 8 million users 70% of customers with service before 24 hours ✓ 95% in 3 day 100% in 4 days Structuring of the First Fibra E of the electricity sector, which allowed its issuance in 2018 ✓ CFEnergía: Import of 62 shipments of liquefied natural gas (LNG) to Mexico First import of diesel (200 thousand barrels by Puerto Progreso, Yucatán) First delivery of coal (520,000 tons for Petacalco) 14#16Recent Achievements 3 new generation plants with 725 MW of capacity and investments over US $ 579 million Baja California III, 298 MW ✓ Cogeneración Salamanca, 402 MW ✓ Humeros III Phase A, 25 MW CFE Comisión Federal de ElectricidadⓇ Decrease in Distribution electricity losses From 12.36% To 11.60% (with high voltage) Begun Distribution of the Fibra Óptica Oscura For telecommunication services 42% increase in telecommunication profits (from MXN $ 621 million in 2016 to MXN $ 880 million in 2017) 15#17Mrt trt to CFE Comisión Federal de ElectricidadⓇ 3. Financial Results#18Revenue composition Revenue distribution during 1Q 2018: $93,115 MXN $Billion 2% 3% 11% 4% 41% $93,115 10% MXN $Billion 11% 18% Industrial ■Domestic Other Income ■Commercial CFE Comisión Federal de ElectricidadⓇ ■Street Lighting Agricultural ■Subsidy ■Other Income - Other Energy Sales 1Other income includes: export income, other programs and products, income from energy transmission, income from the sale of fuels and income from contributions from third parties Source: CFE 17#19Costs 12 months (MXN $Billion) 1Q (MXN $Billion) CFE Comisión Federal de ElectricidadⓇ 334.6 86.9 11% 0.6 2.7 78.3 0.9 34% 4.7 19.6 2.6 0.9 0.8 249.3 6.7 16.1 57.9 3.5 15.7 2.5 29.5 55.4 251.9 64.5 54.0 158.3 12M 2016 12M 2017 ■Fuels Salaries Maintenance Taxes & Duties Wholesale Market Source: CFE Q1 2017 Q1 2018 18#20Debt Profile With coverage Without coverage Source: CFE. As of March 31, 2018. Debt by Currency 49.5% Local 50.5% Local 80.5% Foreign Foreign 19.5% Debt by Interest Rate 66.6% Fixed Rate Fixed Rate 72.4% CFE Comisión Federal de ElectricidadⓇ Floating Rate 33.4% Floating Rate 27.6% 19#2112M Income Statement Consolidated Income Statement (MXN/$Billion) I CFE Comisión Federal de ElectricidadⓇ 334.6 493.9 12M 2017 12M 2016 47.9 159.3 59.5 4.4 13.0 73.3 107.9 Revenues Operating cost Gross Income Cost of labor obligations 47.5 Depreciation Other expenses Operating income Financial costs Taxes Net Income Source: CFE. 249.3 352.1 19.2 53.4 (111.8) 65.8 142.1 102.8 76.3 Revenues Operating cost Gross Income Cost of labor Depreciation obligations Other expenses Operating income Financial costs Taxes Net Income 20 20#2212M Income Statement Without the non-recurring effect of labor liabilities in 2016 CFE Consolidated Income Statement (MXN/$Billion) Comisión Federal de ElectricidadⓇ 334.6 493.9 12M 2017 12M 2016 47.9 159.3 59.5 4.4 13.0 73.3 107.9 47.5 Revenues Operating cost Gross Income Cost of labor Depreciation Other expenses Operating obligations Financial costs Taxes Net Income income Source: CFE. 249.3 352.1 55.7 102.8 53.4 19.2 (25.4) 65.8 (91.3) Revenues Operating cost Gross Income Cost of labor Depreciation Other expenses obligations Operating income Financial costs Taxes Net Income 21 24#23Q1 2018 Income Statement Consolidated Income Statement (MXN/$Billion) 93.1 86.9 Q1 2018 I CFE Comisión Federal de ElectricidadⓇ 6.2 11.5 14.0 (21.2) (11.4) 11.3 1.9 Revenues Operating cost Gross Income Cost of labor obligations Depreciation Other expenses Operating income Financial costs Net Income Q1 2017 128.2 Source: CFE. 78.3 14.4 11.8 49.9 13.9 1.3 36.3 Revenues Operating cost Gross Income Cost of labor obligations Depreciation Other expenses 22.4 Operating income Financial costs Net Income 22 22#24Mrttrtta CFE Comisión Federal de Electricidad® Annexes CFE#25Financial Statements Consolidated Income Statement up to March, 31 2018 & 2017, Unaudited (in millions of pesos) Statement up to CFE Comisión Federal de ElectricidadⓇ Income Q1 2018 $93,115 100% Q1 2017 $128,188 % 2018 vs 2017 100% -27% Energy sales $72,845 78% $85,844 67% -15% Income from energy transportation $160 0% $0 0% 0% Income from sales of fuels to third parties $9,750 10% $859 1% 1035% Income from subsidy $9,886 11% $8,623 7% 15% Other Income $474 1% $32,863 26% -99% Costs $86,888 93% $78,262 61% 11% Fuels and bought energy $64,504 69% $54,091 42% 19% Labor cost and benefits $16,131 17% $15,746 12% 2% Maintenance, materials and services $4,704 5% $6,721 5% -30% Taxes and duties $906 1% $789 1% 15% Wholesale electricity market cost $643 1% $914 1% -30% RESULT BEFORE OTHER COSTS $6,227 7% $49,926 39% -88% Other costs $27,460 29% $27,553 21% 0% Labor obligation cost $11,500 12% $14,426 11% -20% Depreciation $14,042 15% $11,818 9% 19% Other expenses $1,918 2% $1,309 1% 47% RESUL FROM OPERATION (21,234) -23% $22,374 17% -195% Financing cost ($11,339) -12% ($13,960) -11% -19% Net financial (income) / expenses $10,656 11% $12,755 10% -16% FX (income) / loss ($21,995) -24% ($26,715) -21% -18% RESULT BEFORE TAXES ($9,895) -11% $36,334 28% -127% Taxes $1,511 2% $1 0% 105495% NET RESULT ($11,406) -12% $36,332 28% -131% Source: CFE, Financial Division, Q1 Financial Statements 24 24#26Financial Statements Consolidated Balance Sheet up to March, 31 2018 & 2017, Unaudited (in millions of pesos) CFE Comisión Federal de ElectricidadⓇ Q1 2018 (IFRS) % Q4 2017* % Q4 2016* ASSETS Current assets $162,535 11% $183,153 12% $126,007 Cash and short-term investments $50,984 3% $67,238 4% $42,267 Short-term receivables Operation materials $100,076 7% $101,271 6% $69,714 $11,476 1% $14,643 1% $14,026 Loans to employees $12,632 1% $12,339 1% $11,194 Fixed assets $1,244,802 81% $1,391,067 88% $1,287,172 Derivative financial instruments $4,105 0% $16,085 1% $15,646 Other assets $33,163 2% $32,837 2% Deferred assets tax $76,868 5% $76,868 5% $32,644 $0 TOTAL ASSETS $1,534,105 100% $1,574,219 100% $1,472,663 LIABILITIES Short-term $149,843 10% $169,723 11% $106,714 Short-term portion of long-term debt $58,494 4% $56,620 4% $41,728 Other payable and accumulated liabilities $85,732 6% $107,798 7% $61,873 Taxes and duties payable $5,617 0% $5,305 0% $3,112 Long-term $774,654 50% $786,362 50% $825,253 Long-term debt $389,914 25% $401,157 25% $413,982 Labor obligations $363,209 24% $361,780 23% $361,114 Other long-term liabilities $21,531 1% $23,425 1% $50,157 TOTAL LIABILITIES $924,497 60% $956,085 61% $931,966 Equity $609,608 40% $618,135 39% $540,697 Contributions received from the Federal Government $5 0% $5 0% $5 Non cash contributions from the Federal Government $95,004 6% $95,004 6% $95,004 Non controlling participation $15,455 1% $0 0% $0 Accumulate results $79,000 5% $107,910 7% ($1,565) Other integral items $420,144 27% $415,216 26% $447,252 *Does not consider the new criteria of the International Financial Reporting Standards (IFRS) 9 and 15 that are applicable starting January 1, 2018. Source: CFE, Financial Division, 1QFinancial Statements 25 25#27Debt Issuances CFE Comisión Federal de ElectricidadⓇ Formosa Bond 2017, 2018: On February 2018 CFE launched its second Formosa Bond for an amount of USD $727 million. As the first Formosa Bond, the issuance was listed on Taipei's Stock Exchange This transaction was structured with a legal tenor of 30 years with annual amortizations (weighted average life of 15.5 years) The transaction priced on an all-in basis at a yield of 5.00% and was sold to Taiwanese "Buy and Hold" insurance companies, keen on the Mexican quasi sovereign paper Proceeds will be used to pay infrastructure projects (PIDIREGAS) Source: CFE. דיי 26 26#28Relevant Events & Announcements Transmission Line Auctions CFE Comisión Federal de ElectricidadⓇ CFE: Oaxaca High Voltage Direct Current (HVDC) line of 610km and 3,000MW capacity The estimated investment will be USD 1.7 billion. As of today, there are 52 interested participants. In March we had the first Q&A sessions with the interested parties and a second session took place in April. CFE expects to receive bidding offers in June. During July, the results will published and the contract will be signed. SENER*: Baja California and National Grid Interconnection HVDC line of 700km and 1,500MW capacity The estimated investment will be USD 1.1 billion. 106 companies expressed interest, and 6 participants registered. Registration of pre-qualified participants ended on May 25. Reception of technical and economic proposals are scheduled for August 17. Results are expected to be made public this September, and the signing of the contract is scheduled for November 16. *SENER: Secretaría de Energía, or Ministry of Energy. Source: CFE. 27 27#29Relevant Events & Announcements CFE Comisión Federal de ElectricidadⓇ Electricity Auctions On March 28th, the Fourth Long-Term Auction was announced by the Ministry of Energy (SENER) and the Energy Regulatory Commission (CRE). Interested participants will be able to make one or more bids to sell any combination of the following products: ○ Capacity ○ Electricity Clean energy certificates (CEL) The 3 regional grids for this Long-Term Auction are the following: O National Interconnected System (SIN) O Baja California Interconnected System O Baja California Sur Interconnected System Registration of interested participants is scheduled for June 2018 The offers will be accepted and evaluated during October Winning bidders will be announced on November 2nd, and contracts will be signed by February 15th of the following year Source: SENER 28#30The Energy Reform promoted cleaner generation of electricity 3 Finished auctions 7 Capacity GW Sonora 395 MW Baja California Chihuahua 378 MW Generation 41 MW 65 plants Baja California Sur 23 MW Aguascalientes 1,004 MW Billions of USD on 8.6 investments States with new clean 17 energy plants Biggest Solar Project of Latam Coahuila 1,113 MW Nuevo León 493 MW CFE Comisión Federal de ElectricidadⓇ ✓ Tamaulipas 801 MW San Luis Potosí 300 MW Solar Eolic Hydroelectric Solar-Eolic Puebla 68 MW Zacatecas 80 MW Tlaxcala 200 MW Jalisco 100 MW Guanajuato 397 MW Morelos 70 MW Oaxaca 252 MW Yucatán +844 MW Source: https://www.gob.mx/cms/uploads/attachment/file/325634/Electricity_Sector_Outlook_2017-2031.pdf 29 29#31With the Energy Reform and the Auction Outline the CFE has achieved very competitive prices chieved ver Source: CFE. Average price per package USD/(MWh+CEL) 47.7 33.4 20.5 57% 1st auction 2nd auction 3rd auction CFE Comisión Federal de ElectricidadⓇ In the following years CFE will have the capacity to buy electric energy to highly competitive prices. 30 30