May 4, 2017
ENERGY
ALERT
Mexico prepares for
the 3rd Long-Term
Power Auction
On May 2, 2017, the National Center for Energy Control (CENACE) and the Ministry of
Energy (SENER) jointly issued a notice to interested parties for participation in the Third
Long-Term Power Auction. The bidding specifications for the auction are expected to be
released on May 8th, followed by a short period for entertaining questions and requests for
clarification by bidders (May 26 – June 19). The final bidding document will be released by
CENACE on June 27.
This will be the third power auction in Mexico as directed by the Electricity Industry Law. The
first two auctions in 2016 collectively procured approximately 5,000 MW of clean energy
resources (wind, solar and geothermal), not including capacity contracts. Unlike the earlier
auctions where the power was procured exclusively by the Federal Electricity Commission
(or CFE) for its Basic Service Users, the latest auction will for the first time allow qualified
suppliers and/or qualified users to participate in the auction alongside CFE. ¨Qualified¨ refers
to those customers that have a demand exceeding 1.0 MW, and can also include a group of
customers whose collective demand exceeds 1.0 MW, assuming the aggregated demand
complies with SENER’s policy on aggregation and the rules imposed by Mexico’s independent
regulatory commission, the Energy Regulatory Commission (or CRE).
On or before July 31, 2017, CENACE will entertain purchase offers for needed power supplies
from CFE, which continues to maintain the obligation to supply power to ¨Basic Service¨
customers – those small and medium customers that must continue to take service from CFE.
Basic Service Users do not yet have the ability to purchase power directly from competitive
suppliers.
Auction participants who offer the lowest prices relative to the aggregate amount of Basic
Service and Qualified Supply purchase offers, can either sign contracts with CFE Basic Service
or alternatively, with Qualified Users and/or Qualified Suppliers. It is significant to note that
in addition to private companies, Qualified Suppliers may also include CFE Calificados – an
affiliate within the CFE corporate entity that is permitted to compete directly alongside private
companies.
Another distinguishing feature of the third auction is the creation of a ¨Clearing House¨,
which will provide a mechanism for ensuring that all auction participants have adequate
financial strength to protect against the risk of a default. The Clearing House uses standard
financial industry protocols to evaluate credit worthiness and establish the necessary
terms of financial assurance (i.e., letters of credit, guarantees, etc.) that must be posted
by auction winners, with the exception of CFE. Because CFE was the only buyer in the first
two auctions, the establishment of a Clearing House was not necessary until the upcoming
auction.
The third auction adheres to the same principles of transparency and openness, which is
intended to foster investor confidence and result in robust participation. CENACE projects
that final decisions will be made by November 22, 2017.
In the published call, the most important activities in the estimated calendar established for
the development of the Long-Term Power Auction 2017 are as follows:
Summary of the first two Long-Term Auctions
*2017
Summary of the first two Long-Term Auctions

√A total of 6.6 billion USD will be invested: 2.6 billion USD (1st Auction) + 4 billion USD (2nd Auction).
√ A total of 34 generation companies will be established in Mexico in 15 states.
√In CELs and Cumulative Energy, solar energy projects won the largest portion (61% and 54%, respectively), while in Capacity, combined cycle projects held the largest share (72%).
√ In the below table you can see the final numbers awarded by technology per product auctioned:
Contacts:
Alfredo Álvarez
[email protected]
Héctor Rocha
[email protected]
Rafael Aguirre
[email protected]
José Salas
[email protected]
Paul Roberti
[email protected]
Loïc Le Gall
[email protected]