30 March 2016
Mexico has just announced the winners of its first-ever power tender. Whilst much attention has been given to Mexico's reform of its oil and gas industry, the electricity sector is also undergoing significant change. In November 2015 the state market operator, Centro Nacional de Control de Energía announced the first auction of long-term power purchase agreements for the sale and purchase of power, capacity and clean energy certificates. Unlike other jurisdictions across the region, the auction was not only for renewables (biomass, geothermal, wind, solar, tidal, nuclear, etc) but also gas fired power projects and efficient co-generation. In the first round, the winning offers were limited to electricity generated by solar (56%) and wind (44%), reportedly for a total estimated amount of 5.3 million GWh. The list of eleven winning bidders out of more than 60 pre-qualified bidding entities indicates strong interest amongst well-known international developers. As we look ahead, there are several questions about the opportunities and challenges that Mexico's power market liberalization will present for those seeking to provide funding on a project financing basis, not just in this first round of bids but also beyond.
First Power Auction under Mexico's New Power Regime: Cautious Optimism for International Investors