The Mexican government has given its approval for the construction of four hydroelectric projects in three states, according to country’s Federal Electricity Commission as reported by the Dow Jones news agency.

Alfredo Elias Ayub, head of the Federal Electricity Commission, or CFE, said President Vicente Fox approved the four projects if financing can be found.

One dam would be located in the north-western state of Nayarit, one in the southern state of Guerrero and two in the southern state of Chiapas, Elias said at a chemical industry conference.

Each project would require investment of about $800m and generate 800 MW, he added. The projects would be paid for with public funds and government owned.

Finance Ministry approval is required before tenders can be sought.

The CFE has about 36 000 MW of generating capacity, of which about a quarter is hydroelectric power.

Because of the economic contraction, electricity demand growth this year will be much less than the annual 6 per cent included in government forecasts for the next decade.

Elias said that if the CFE finds itself with spare capacity as a result of the current economic contraction, it will begin taking older plants off the grid and using the newer, more efficient plants.

Despite plans for the four hydroelectric plants and two new coal-fired plants, natural gas will still be the fuel used for 60 per cent of Mexico’s electricity generation by 2010. “The availability of gas is still a critical factor,” Elias said.

He also said the CFE is planning to diversify its sources of income in the next few years, taking advantage of its commercial infrastructure that reaches more than 19 million customers.

As examples of diversification by power companies, he mentioned gas distribution, water, and telecommunications, but didn’t specify what areas the CFE might tackle.

“We hope that 20 per cent of CFE’s income will be from non-electricity sources by the end of the current administration (2006),” Elias said.