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Electricity Projects & Regulation

Mexico

Published on Wednesday 16th August 2017

    • Mexico

      According to the National Grid Development Plan (PRODESEN) 2017– 2031, Mexico’s existing aggregate generation capacity by the end of 2016 was 73,510MW from the following sources:

      Conventional thermoelectric

      Internal combustion and fluidised bed

      Turbo gas

      Natural Gas and combined cycle

      Coal

      Hydro

      Nuclear

      Geothermal, solar and others

      Bio energy and efficient cogeneration

      Wind

      17%

      3%

      7%

      40%

      7%

      17%

      2%

      2%

      3%

      5%

      Clean technologies registered an annual growth of 10.2 per cent by the end of 2016 and conventional technologies registered an annual growth of less than 7.2 per cent. 

      Last verified on Friday 18th August 2017

    • Mexico

      The clean energy auctions awarding long-term power purchase agreements have been a complete success, in particular for the growth of the solar and wind power sectors. The National Centre for Energy Control (CENACE) has conducted long-term energy auctions that award 15-year contracts for capacity and clean energy and 20-year contracts for CELs, with the state-owned public utility – the Federal Electricity Commission (CFE) as the principal off-taker. The first auction awarded in March of 2016 contracts to 11 companies for 18 projects representing 2.1GW of new capacity, which will sell energy from solar and wind facilities. The second auction awarded 56 contracts to 23 companies in September 2016, which in aggregate represent an additional capacity of 2,916MW. A third auction has been scheduled for November 2017.

      As it pertains to conventional power, during the past few years, CFE has launched an ambitious programme for construction and operation of natural gas pipelines to supply natural gas to its fleet of new gas-fired power generation projects, as well as those being built as independent power producer projects, which as a whole exceed 10,000MW of generating capacity. This is as a result of the low cost of natural gas from the United States and the relatively quick deployment time for building a plant and attaining commercial operation.

      The government has projected that 55,840MW of additional installed capacity will be required to satisfy demand between  2017 and 2030, with 37 per cent of such capacity coming from conventional power sources, mainly combined-cycle power plants, and the remaining 63 per cent from clean energy sources, mainly wind, solar, efficient cogeneration, hydro and nuclear power. For this, the government has planned the construction of new power generating facilities and withdrawal of existing fuel-sourced, older and less efficient plants, as well as the modernisation of the national transmission grid and the distribution networks.

      The Mexican government has set a goal for a percentage of its aggregate generation capacity to be generated by clean energy sources. The energy reform bets on a mechanism of tradable clean energy certificates (CELs). Facilities generating power from “clean energy” sources will receive one CEL for each megawatt-hour of electricity generated, while load responsible entities, such as suppliers and large consumers, will have the obligation to evidence that a percentage of their aggregate energy intake derives from clean energy sources. Generators using both renewable sources and fossil fuels will receive CELs corresponding to the percentage of renewable sources used, provided that the percentage of clean energy used is above a threshold determined by the Energy Regulatory Commission (CRE).

      The short-term energy market has also commenced operations. Nineteen generators, CFE, in its capacity as basic service supplier and three qualified service suppliers have registered to participate in this market. The number of market participants is expected to grow in the following months, thus increasing the number of operations that will be conducted in such market.

      For the first time, CENACE published the results of the 2016 capacity balance market. This market sets the prices of capacity depending on the national grid’s shortage or excess of capacity. The indicative purpose of this publication may be used as a reference for the promotion of additional power generation projects that will satisfy current demand.

      Last verified on Friday 18th August 2017

    • Mexico

      The electric industry law allows the private sector to participate freely in the generation and sale of electricity and the construction of transmission and distribution infrastructure, while maintaining the electricity grid under the operational control of CFE and its transmission and distribution subsidiaries. 

      The new legal framework has created a wholesale electricity market operated by CENACE as a single independent system operator for the entire grid. Market participants are now able to sell and purchase power directly in the market or through bilateral PPAs, including those awarded through the auctions.

      Entities that obtained power generation permits prior to the enactment of the reforms are entitled to continue to operate under their existing permits, but have the choice of migrating to the new system. These permit holders are entitled, on a one-time basis, after this migration, to revert to their legacy permit and operate again under the previous legacy regime.

      Operational control of the national grid and the transmission and distribution of electricity are considered strategic areas that remain in the hands of the Mexican government. However, the private sector will be able to participate in the transmission and distribution of electricity through agreements and joint ventures with state-owned enterprises. CFE is permitted to participate, through separate subsidiaries, in the different market activities, and is the supplier of basic retail services to residential customers and small and medium-sized commercial customers under regulated tariffs. As part of the energy reform, CFE has been unbundled into nine new subsidiaries: transmission and distribution services have been allocated to two separate independent companies; generation assets and services into six generation companies; and basic retail services to a separate subsidiary. Nuclear power generation remains under the control of the Mexican government.

      Last verified on Friday 18th August 2017

    • Mexico

      CRE is the regulator of the Mexican energy industry. It is responsible for the issuance of permits to and registration of market participants, setting tariffs for transmission, distribution and basic retail services, setting the general conditions and rules for market participants, issuing standard models of interconnection contracts and a model contract for the independent system operator to execute with market participants for sale of power in the wholesale market, as well as issuing clean energy certificates. 

      Last verified on Friday 18th August 2017

    • Mexico

      As of of August 2016, off-takers with an aggregate consumption equal to or greater than 1MW will be classified as “qualified users” and will be allowed to purchase electricity directly from qualified service suppliers different from CFE. Qualified users with aggregate consumption levels equal to or greater than 5MW are classified as “market participant qualified users”, this qualified user subclass is permitted to purchase different products directly in the wholesale electricity market without having a supplier as an intermediary.

      In addition, off-takers who, prior to the enactment of the law, purchased power pursuant to the self-supply, cogeneration and energy import schemes under the former regime, may choose to stay under such regime or migrate to the new one as qualified users, provided that they meet the statutory intake levels to become qualified users.

      Off-takers that do not meet these criteria may only purchase electricity from retail service suppliers, namely CFE and its subsidiaries. However, off-takers meeting the criteria may register with CENACE as qualified users for certain load points, while remaining basic service users for other load points.

      CFE continues to be the supplier of basic retail services to residential customers and small and medium-sized commercial customers under regulated tariffs. As such, it is expected to remain the predominant utility in Mexico. As a basic service supplier, CFE may only purchase energy, capacity and CELs through public auctions.

      Last verified on Friday 18th August 2017

    • Mexico

      CFE’s payment obligations under the PPAs awarded through the auctions are not backed up or guaranteed by the Mexican government. However, under the PPA, CFE must deliver a payment guaranty in the form of a standby letter of credit, the amount of which is meant to cover a portion of CFE’s payment obligations.

      Payments to independent power producers under the former regime were earmarked in the federal budget and, as such, have precedence over other CFE payment obligations.

      While CFE is an investment grade entity, it is yet to be seen whether the new subsidiaries that it has divested into as a result of the energy reform will be as well and whether these subsidiaries’ payment obligations will be backed or guaranteed by the CFE parent entity.

      Last verified on Friday 18th August 2017

    • Mexico

      A single independent system operator, CENACE, formerly a unit within CFE, operates the new wholesale electricity market and the electricity grid.

      The principal tasks and duties that CENACE performs include: control and operation of the grid, including dispatch; setting the pricing of energy and capacity in the merchant market; conducting studies prior to the execution of interconnection agreements; organising power tenders and acting as intermediary between sellers and purchasers; acting as intermediary between generators and large consumers that have bilateral PPAs by ensuring the delivery of the electricity required under such PPAs (even if it exceeds the generator’s production); and billing, invoicing and netting power sales and trades in the market.  

      Last verified on Friday 18th August 2017

    • Mexico

      Retail electricity rates are currently set by the Mexican Ministry of Finance based on a proposal from the CFE. Rates are set depending on the fuel source generation mix and the actual cost of fuels, with natural gas being the highest percentage within the calculation formula, followed by domestic coal, imported coal, fuel oil and industrial diesel. The Ministry of Finance updates these components on an annual basis based on the domestic consumer price index.

      CRE will be setting the final retail and last resort supply tariffs based on the cost of energy and ancillary services required. CRE will also set transmission, distribution and operational tariffs.  Transmission and distribution tariffs for years 2016 to the end of 2018 are in place. CRE has also published CENACE's operational tariffs for 2016, but has yet to issue operational tariffs for basic service suppliers. 

      As a consequence of the energy reform, the rates for regulated supply to consumers, for transmission and distribution services and last resort supply will be set by CRE. The President of Mexico is entitled to set different rates to particular social groups, under particular economic circumstances.

      Last verified on Friday 18th August 2017

    • Mexico

      The principal approvals required to build and operate a power project include a power generating permit issued by CRE, an environmental impact assessment issued by the Ministry of Environment and Natural Resources, a social impact assessment approved by the Ministry of Energy and the execution of an interconnection agreement with the transmission services carrier. The project sponsor must obtain local municipal construction permits.

      All land rights used for energy projects must meet minimum criteria requirements set forth in the electric industry law, including a negotiation process for the relevant parties to reach an agreement regarding the terms of payment for such rights.

      Depending on the type of project, other federal and local permits pertaining to rights of way, use of water, crossings, industrial security, labour and workers’ compensation, among others, may be required.

      Time frames for issuing permits vary depending on the nature of the permit, but can be provided by applicable laws and regulations and, in many instances, are also dictated by the relevant agency’s workload. For example, interconnection approval may take anywhere from four to nine months, given the different types of studies required and CENACE's workload.

      As at the day of this publication, the regulations applicable to the social impact assessment studies have not been published yet. Thus, it is difficult to determine the time frame for these authorisations to be issued. 

      Grounds for revocation vary from permit to permit, but breach of material obligations thereunder is the most common cause for revocation. Levels of fines for failure to comply with the applicable permits may vary depending on the specific situation and could amount to several thousand US dollars.

      Last verified on Friday 18th August 2017

    • Mexico

      CENACE, the country’s independent system operator, is conducting auctions to award long-term PPAs for capacity, energy from clean sources and CELs. CENACE has recently published a medium-term auction manual, which establishes that CENACE will also conduct at least one auction per year for the award of three-year PPAs for the sale of energy, and capacity. All technologies and sources of energy will be able to participate in these auctions.

      The first two auctions for long-term contracts have had CFE as the sole off-taker. The Ministry of Energy ihas recently published the operative guide to set up a clearinghouse to allow private entities to participate in the long-term auctions as off-takers, alongside CFE. The clearinghouse will be a private entity that will serve as the administrator of the contracts between the generators and the private off-takers. We anticipate that additional off-takers will participate in future auctions as purchasers, although this will likely take at least another year, until the structure of the clearinghouse is finalised and placed in operation.

      Last verified on Friday 18th August 2017

    • Mexico

      Renewable energy projects operating under the old regime maintain their legacy benefits, including net metering, postage-stamp wheeling tariffs and an energy bank.

      There is no specific regulatory regime for renewable energy projects. However, in late 2015 Mexican congress passed an energy transition law to promote the use of renewable sources.  This law is the first to differentiate between conventional energy, clean energy and renewable energy.  Renewable energy includes wind, solar, mini-hydro, tidal, geothermal and biomass.

      The Mexican government has chosen clean energy certificates as the mechanism to foster the development of clean energies. Beginning in 2018, large consumers will be required to purchase CELs for an amount equal to at least 5 per cent of their aggregate energy consumption, while for 2019, this threshold has been increased to 5.8 per cent. The threshold will be updated on an annual basis for the following three-year period. The mechanism, yet untested, has proven to be unpopular among industry participants and consumers. 

      Unlike other jurisdictions where the use of renewable energies is actively encouraged through public policy, in Mexico there are still several barriers to their development. In 2013, a 15 per cent customs tariff was imposed on solar photovoltaic panels imported from countries that do not have a free trade agreement with Mexico. This tariff has affected, for example, panels imported from China. The Mexican government has not issued specific rules for the interconnection of renewable projects to the grid.

      Last verified on Friday 18th August 2017

    • Mexico

      There is a tax incentive in place in Mexico consisting of an accelerated depreciation tax benefit for renewable energy projects, which allows a renewable power producer to depreciate 100 per cent of all machinery and equipment utilised in the generation of energy from renewable sources in one year. The project company can elect to depreciate in the year of utilisation or the following year. Alternatively, it can also choose to apply lower depreciation rates. The benefit of the accelerated depreciation will be allowed only to the extent the machinery and equipment are in operation for at least five years.

      The income tax law has been modified to allow companies with renewable energy or efficient cogeneration assets to have a “profit account for the investment in renewable energy”. In general terms and subject to certain conditions, this account grants such companies the right to distribute profits without having to pay income tax on such profits.

      Last verified on Friday 18th August 2017

    • Mexico

      The federal government has published the rules for the creation of an energy and infrastructure investment trust called Fibra E, along with the applicable taxation rules. The purpose of a Fibra E is to attract investment for any company involved in the energy and infrastructure sectors that complies with certain requirements, through the securitisation of existing assets, while providing significant tax and economic advantages. This tool is based on the master limited partnership model used in other countries and works similarly.

      In April 2016, the regulations applicable to this kind of vehicles were modified to: (i) allow the deferral of earnings resulting from the transfer of the relevant company’s shares; (ii) clarify that such advantages are also applicable to companies which purpose is to transport, store and distribute hydrocarbons and others holding concession titles to build and operate infrastructure; (iii) implement transparency mechanisms in respect of the holders of any stock certificates of such vehicles; and (iv) consider the repurchase of its own stock certificates held by other stock holders as an investment up to certain thresholds.

      Last verified on Friday 18th August 2017

    • Mexico

      There are no restrictions or limitations on repatriation of capital or profits, but there are reporting obligations. Repatriation of capital may be made in any foreign currency. Furthermore, there are no restrictions, limitations or taxes on foreign currency exchange. Companies may hold bank accounts in foreign currencies in and outside of Mexico.

      Moreover, Mexico is a party to several multilateral and bilateral agreements protecting and promoting foreign investment, such as free trade agreements and agreements on reciprocal promotion and protection of investments. 

      Last verified on Friday 18th August 2017

    • Mexico

      The mechanism for trading of CELs has been implemented to promote clean energy projects and diversify energy sources. Beginning in 2018, large consumers and suppliers will be required to purchase CELs for an amount equal to at least 5 per cent of their aggregate energy consumption, while for 2019, 2020, 2021 and 2022 this threshold has been increased to 5.8, 7.4, 10.9 and 13.9 per cent, respectively. CELs may be either sold or acquired by market participants through auctions or direct sales. Minimum purchase requirements for clean energy certificates will be set the first quarter of each year for the following three-year period. CRE will issue the clean energy certificates and will maintain a registry for control purposes. Off-takers with interconnection contracts entered into prior to the enactment of the energy reform are exempted from the obligation to purchase clean energy certificates to the extent they purchase electricity from clean energy sources in a quantity sufficient to cover their entire electricity needs. 

      Last verified on Friday 18th August 2017

    • Mexico

      In terms of installed capacity, hydropower projects represent the most successful renewable energy source, followed by wind energy and, lately, solar PV. Large-scale hydropower projects traditionally have been sponsored and are operated by CFE. 

      As a result of the long-term auction conducted by CENACE and awarded in March 2016, solar projects representing almost 1,700MW and wind projects representing 394MW were awarded long-term PPAs with CFE as off-taker. In September 2017, the second long-term auction awarded PPAs to projects representing 3,776MW of aggregate capacity, 2,871MW of which will be newly installed capacity. In contrast with the first long-term auction, the second long-term auction also awarded PPAs for capacity (potencia). The government projects that by 2030 the country's energy matrix will consist of 42GW from gas-fired sources, 15GW from wind sources, 14.5GW from hydro and 7GW from solar.

      The electric industry law regulates distributed power generation, which may prove to be a successful mechanism for the development of solar technologies on a smaller scale. However, distributed generation rules are yet to be published.

      The energy reform has also opened the market to development of geothermal power projects by the private sector, given the important geothermal resources in Mexico. However, geothermal energy is expected to represent a smaller percentage of the energy mix than hydro, wind and solar. Other renewable technologies are likely to play a much smaller role in the energy mix. 

      Last verified on Friday 18th August 2017

    • Mexico

      Social issues have proven to be at times an obstacle to the development of power projects in some of the poorest or most marginalised regions in Mexico. Communities in these regions live in communal agrarian property and securing rights to use such land can be a complicated process that requires the approval of the community. The electric industry law contains several provisions regulating the social impact of power projects on local and indigenous communities; it requires all applicants for power generation permits to submit to the Ministry of Energy a social impact assessment that describes the potential social impact on the local community and offers mitigation measures.

      Interconnection costs and grid congestion have become an issue for the development of electricity projects. Mexico’s next big challenge is transmission, as it has sufficient resources to generate power but limited transmission capabilities to wheel electricity across the country. The PRODESEN includes several transmission and distribution network projects and it is likely that we will see some of these projects begin construction in the next couple of years, including  the interconnection of the Baja California Sur system to the national grid by constructing a underwater transmission line that connects the Baja Peninsula to the State of Sinaloa, and the construction of a 610km and 500kV direct current transmission line that will run from Ixtepec, Oaxaca to Yautepec, Morelos.

      Last verified on Friday 18th August 2017

    • Mexico

      Subsurface rights are separate from land rights. Sub-surface rights belong to the Mexican state. The Mexican government may grant concessions to use subsurface land for mining, oil and gas drilling and production or for geothermal exploration and production, among others. In the latter case, the law provides that the use of subsurface land for geothermal exploration and production has precedence over any other rights landowners may have (including mining), except for activities related to hydrocarbons.

      Last verified on Friday 18th August 2017

    • Mexico

      CRE has published the applicable wheeling tariffs for years 2016 through 2018 for all power projects, regardless of technology and has structured them based on a postage-stamp model. Tariff calculations are based on a cost recovery formula plus a reasonable return.

      Only the holders of permits for renewable energy projects issued prior to the enactment of the energy reform benefit from a postage-stamp wheeling tariff.

      Last verified on Friday 18th August 2017

    • Mexico

      The electric industry law mandates open access for transmission and distribution facilities, subject to technical and security requirements. Electricity transmission and distribution activities are considered strategic areas and public interest services, and thus remain the responsibility of the government.

      CRE will issue the general conditions for the delivery of electricity transmission and distribution services, which must include the criteria and requirements to offer not unduly discriminatory open access.

      CENACE regulates the interconnection of power plants and load points with the national grid. CENACE may direct service providers to interconnect power plants requesting interconnection under terms that are not unduly discriminatory. Transmission providers and distributors are required to enter into interconnection agreements using standard forms issued by CRE.

      Private transmission lines not connected to the national grid or the general distribution networks may be built and will not be subject to open-access obligations.

      The PRODESEN includes an ambitious plan for the expansion and modernisation of the national grid, which considers the construction of 24,599km of new transmission lines from 2015 to 2029, representing an approximate investment of US$15.3 billion. CFE is expected to publish shortly the invitations for bidders to participate in the first tenders for the award of contracts for the development of these projects.

      Last verified on Friday 18th August 2017

    • Mexico

      2016 saw the tail-end of financings for wind and hydro projects that held permits issued prior to the enactment of the energy reform is readily available as these projects had a deadline of 31 December 2016, to evidence spending of at least 30 per cent of total project costs to be in a position to maintain their permits.

      For projects under the new regulatory regime, the biggest current obstacle is that the Mexican government issuing some of the rules and guidelines for sales into the wholesale market, direct bilateral sales, social impact, basic supply tariffs, interconnection and wheeling. Until the entire framework is in place, investment in new projects outside of the auctions will continue to be slow.

      Last verified on Friday 18th August 2017

    • Mexico

      The current most significant obstacles are the uncertainty pertaining to the framework for the electricity market, which has not been finalised by the Mexican government, and the fact that the wholesale market commenced operations in January 2016, without any precedents to guide market participants. Investors require legal certainty. The achievement of this milestone is a significant step for the Mexican government, but it is still too soon to know how long it will take for the market to function as planned and for private parties to participate in it.

      Last verified on Friday 18th August 2017

    • Mexico

      The long-term auctions conducted by CENACE are significantly promoting the development of clean energy generating infrastructure. Since these auctions must be conducted on an annual basis, we will still see plenty of opportunities for renewable power projects to be developed as they will be able to secure long-term PPAs with CFE or other private off-takers – once a clearing house is established.

      The Mexican government, through the state utility, CFE, is in the midst of implementing an ambitious plan to expand the fleet of combined cycle gas turbine (CCGT) facilities that sell power to it, as well as expanding the gas pipeline system that feeds its own CCGT fleet and those being built as independent power producers. CFE must replace 10,000MW of generation capacity over the next four years, which it plans to do through a mix of gas, thermal and renewable energy sources to be mainly built and operated by the private sector.

      The Ministry of Energy expects that the investment in the Mexican electricity sector reaches an approximate amount of US$131.6 billion over the next 15 years, 75 per cent of which will be destined to power generation, 12 per cent to transmission infrastructure and 13 per cent to distribution infrastructure. According to the Ministry of Energy, between 2016 and 2030, 57 GW of new generation capacity will be added, with 400 new power plants being built during this period, 63 per cent of which will be clean energy generating power facilities. The Ministry also expects to shut down 140 obsolete and inefficient power plants during this period.

      In terms of consumption, industrial consumers represent the largest growth sector over the next five years, while mid-sized commercial consumers are also expected to increase their energy consumption.

      Last verified on Friday 18th August 2017

    • Mexico

      Prior to the long-term power auctions conducted by CENACE, given that most PPAs were local currency based and given a very significant increase in liquidity by Mexican commercial and development banks, the trend for some time in the Mexican finance market had been for projects to be financed in local currency and, depending on the sponsor and lenders, with Mexican law-governed documents. However, given the size of the projects that have been awarded PPAs under the auctions and the fact that auction PPAs may be indexed in US dollars, international banks will play a very significant role in the financing of these and future projects that are awarded contracts in the long-term power auctions.  

      Last verified on Friday 18th August 2017

    • Mexico

      Not yet, notwithstanding the fact that there is an appetite for it. We are ony aware of only one successful refinancing in the international capital markets of two utility scale wind projects and a greenfield bond financing of a gas-fired power plant, with recourse to the sponsor in the form of a completion guaranty. However, we do expect to see a few of the projects that were awarded long-term contracts under the auctions to refinance equity or debt in the capital markets.

      Last verified on Friday 18th August 2017

    • Mexico

      Although the price of natural gas is denominated in US dollars and the main components of generation equipment are priced in US dollars, private bilateral PPAs are mostly denominated in local currency. This helps mitigate foreign exchange risk and allows visibility for future cost increases based on the official inflation rates.

      Long-term contracts awarded through CENACE's auctions may be indexed in US dollars or local currency. Payments under the PPA will be made on a monthly basis, with an annual settlement, and will be adjusted for inflation and exchange rate should the PPA be indexed in US dollars. If the PPA is denominated in US dollars, a small penalty is applied in order to share foreign exchange risk exposure. 

      Last verified on Friday 18th August 2017

    • Mexico

      Foreign investment is permitted in all power sector activities except for those specifically reserved to the Mexican government through its state-owned productive enterprises (such as CFE), including transmission and distribution of electricity and nuclear power generation, as these are considered strategic areas.

      Foreign companies and Mexican companies with foreign investment must be registered in the National Foreign Investment Registry. Registered companies are required to comply with certain reporting obligations on an annual and quarterly basis for statistical purposes, including certain economic and financial data.

      In connection with the development of electric generation facilities, foreign companies are restricted from acquiring land located within a restricted zone of 100 kilometres along the Mexican borders and 50 kilometres along the coastlines. However, it is possible to acquire such lands indirectly through real estate trusts.     

      Last verified on Friday 18th August 2017

    • Mexico

      The M&A market for power assets – particularly for renewables – is very active. Prior to the enactment of the energy reforms, hundreds of renewable energy project developers applied for generation permits to be issued under the old regulations, mainly to operate under the self-supply scheme, which would allow them to sell directly to private commercial consumers through PPAs and benefit from the postage-stamp wheeling tariff and energy banking. Most of these developers applied without having in place proper funding, both from equity and debt, to build the projects and reach commercial operations. To maintain their permits, these permit holders had to provide evidence to the CRE no later than 31 December 2016 that they had spent at least 30 per cent of total project costs. This has created an opportunity for investors with liquidity to acquire from a large pool of development projects.

      Several of the parties that obtained the legacy permits and guaranteed interconnection, are now in the process of transitioning their permits to generation permits under the new regulatory regime and bidding their projects in the long-term clean energy auctions. We are seeing a flurry of M&A activity for these projects and projects that were awarded PPAs in the first two long-term auctions. 

      Last verified on Friday 18th August 2017

    • Mexico

      Many power purchase agreements in Mexico provide for commercial arbitration as the preferred dispute settlement mechanism, with the International Chamber of Commerce as the most common choice of arbitral institution. However, submission to the jurisdiction of federal courts is also common. In our experience, few cases have been tested in the local courts, which lack experience and sophistication with complex commercial arrangements such as those in PPAs.

      Both CFE's PPAs with independent power producers and the new PPAs awarded under CENACE's auctions, have international arbitration as a dispute resolution mechanism. Both PPAs call for international arbitration administered by the London Court of International Arbitration. 

      Last verified on Friday 18th August 2017

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