MEXICO Trends and Developments Contributed by: Carlos de Maria y Campos, Francisco Fernández Cueto, Antonio Borja and Eduardo García Travesi, Galicia Abogados
• Contracts must specify capacity, payment formu- las, reliability requirements, penalties and dispute resolution mechanisms. • The maximum contract duration is 30 years, allow- ing for full investment recovery. • CFE may acquire the asset upon termination of the agreement without additional consideration. Long-term production schemes: • provide stable, long-term revenue streams; • are attractive for large-scale, bankable projects; and • impose strict operational and availability standards. Mixed investment – CFE and private investors co- participate in the development of power generation assets through special purpose legal or financial vehi- cles, including corporations, trusts, joint ventures, and other agreements. Key features include the following. • CFE must hold a direct or indirect interest in the project, at least equal to 54%. • CFE’s participation can be made in cash or in kind, including through tangible and intangible contribu- tions (eg, land, permits, offtake rights). • Governance, operational rules, technology updates, dispute resolution and exit terms must be clearly defined in the relevant agreements and project structure. Key challenges – While mixed-investment schemes offer structured opportunities, they also introduce new complexities. • Limited commercial flexibility – CFE is the preferred offtaker, represents the asset in the MEM, and commercialises its products in the MEM. • Regulatory control – Strong alignment with state’s planning and technical standards is mandatory. • Governance complexity – Particularly where CFE holds a 54% or greater interest in a private project company. • Long development timelines – Project approval and structuring require navigating formal processes.
• CFE contribution – CFE’s investment in the pro- ject can be formalised after it reaches commercial operation, which places development, construction and financing stress in CFE’s private partner. • Performance obligations – Strict penalties and availability requirements increase operational dis- cipline. In short, consider the following. • Long-Term Production offers predictable revenues and operational clarity – but low flexibility. • Mixed Investment gives more involvement to private investors – but with higher governance complexity. • Success will depend on sophisticated structuring, robust operational capacity, and a clear regulatory strategy. Renewable energy and storage as strategic levers Renewables remain at the core of Mexico’s energy transition. For the first time, the LSE formally recog- nises energy storage as a strategic asset, enabling its participation in both planning and dispatch. This marks a shift towards more flexible, reliable and effi- cient electricity supply. Key trends are as follows. • Hybrid renewable + storage projects are expected to receive planning priority. • Corporate demand for clean energy is driving more sophisticated contracting structures. • Storage supports ancillary services and strength- ens grid stability. Although the framework is defined, secondary regu- lation for storage is still pending and is expected no later than April 2026. Clear technical and commercial rules will be essential to unlock investment at scale. Social considerations: energy justice and MISSE The new model places social considerations at the core of energy development. While concepts like ener- gy justice guide the public policy towards more inclu- sive projects, the Social Impact Assessment ( Manifes- tación de Impacto Social del Sector Eléctrico , MISSE) is a binding legal requirement.
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