Mexico formally invited private developers that are interested in developing power projects jointly with the national utility, CFE, in joint venture-like structures known as "mixed investment projects" on February 6 to submit proposals. Interested developers must register with CFE by February 20.

This is the first such invitation following publication of guidelines for planning, development, construction and operation of such joint projects. (For more details see CFE Publishes Guidelines For Some Mexican Projects.)

Mixed Investment Projects

Mixed investment projects are those in which CFE participates directly or through affiliates, trusts or other vehicles. CFE must hold, directly or indirectly, at least 54% of the equity of the project company.

The private developer must contribute 100% of the cash capital contributions required. CFE will only make in-kind contributions, thereby avoiding the pitfalls of indebtedness and financial consolidation for CFE.

CFE has offered developers two different avenues to participate in such projects. 

One is by bidding to participate in the joint investment with CFE in two projects that CFE already has under development: the 215-MW Cerro Prieto solar PV facility in northern Baja California and the 858-MW Concepción Mendizabal solar PV facility in northeastern Mexico. The latter project is being developed in four phases.

The other option is by bidding for new projects in specific regions, for specified capacity needs and for pre-determined renewable technologies, namely wind and PV and thermal solar. CFE is seeking approximately 6,500 MW of new capacity across the country, including 3,550 MW of solar, 2,850 MW of wind and 100 MW of concentrated solar power.

All projects put out for bid are expected to be under construction by November 2026 and in commercial operation in 2028 and 2029.

Projects will be offered long-term anchor PPAs of up to 25 years with one of two CFE subsidiaries: CFE Basic Supply and CFE Qualified Supply. Each PPA would cover approximately 70% of the electricity output from a project. The remaining 30% may be sold through the wholesale electricity market or to third parties. In all cases, CFE will represent the project in the market.

Energy storage systems that are part of the projects will operate under a tolling scheme with CFE.

Each joint venture will be a special-purpose vehicle in the form of a trust under Mexican law. All existing development rights and assets of the project will be contributed to the trust, and the trust agreement will include the rights of CFE and the private partner as settlors and beneficiaries. The trust will have a joint venture operating agreement and enter into EPC, O&M, management services, power purchase agreements and other project contracts.

Private investors may hold up to 46% of the equity and will be responsible for project development and construction.

Per the invitation, projects are expected to be financed with 20% to 30% equity and 70% to 80% debt. Debt may be sourced from development banks, commercial banks, export credit agencies, investment funds and the public debt markets.

To reach its 54% equity stake, CFE may contribute tangible assets such as land and long-term PPAs as well as intangible support in the form of permitting and technical studies. CFE will not contribute cash.

CFE will have standard corporate rights and veto rights over key matters such as dissolution, mergers, insolvency, asset sales and transfers, and amendments to distributions, contracts and project activities. We expect these provisions to be heavily negotiated in the JV operating agreement.

Notwithstanding holding a minority of the common equity, private investors are expected to have majority voting rights at any meetings of equity holders, control of the trust’s technical committee through appointment of the majority of the technical committee members, and the ability to appoint the management team.

Each party will assume specific tasks during the operating phase. CFE will perform preventive maintenance for the project and corrective maintenance for substations and transmission lines, and it will provide auxiliary and supervisory services.

Private investors will be responsible for the availability and performance of the power plant and for corrective maintenance and spare parts for the power plant, and they will provide specialized operational services, which may be subcontracted.

During operations, project revenues will first be applied to operating costs and working capital, followed by debt service. Available cash will then be distributed primarily to the private investor until it achieves its target internal rate of return.

Automatic Transfer

The catch is that once the target IRR is achieved or, if earlier, upon expiration of the PPA term, ownership of the asset must transfer to CFE. During the term of the PPA, CFE may make capital contributions to accelerate the private partner’s exit. After the asset transfer, any remaining distributions will accrue to CFE. For financing purposes, we expect the debt to remain at the project level. Private developers and their lenders will have to be comfortable with the foreclosure risk.

The selection process will be conducted through the Energy Ministry’s online platform “Ventanilla Energía”. The timeline is ambitious.

Interested developers must register by February 20, 2026, although it is possible that CFE might extend the deadline if asked to do so by interested parties. Each participant must submit a web-based application indicating whether its proposal aligns with a specific CFE-identified project or with regional capacity or technology requirements.

Each applicant must indicate its technical and financial capacity and submit a financial plan, a technical description of the proposed project, documentation identifying the project’s development status, permits and preliminary social and environmental assessments, total investment amount and expected CAPEX and provide indicative EPC and O&M contract terms (if available), among other information.

Projects will be evaluated based on four categories of criteria. The first is economic, including CAPEX, target IRR, time period to exit the project and PPA pricing. Next is financial capability, assessment of financial strength and ability to absorb contingencies. Third is technical capability, including experience in renewable power generation and battery storage systems. Last is the partnership structure, including project readiness, allocation of management and operating responsibilities, and corporate governance.

Following registration, CFE will conduct a technical review and pre-selection process through March 13, 2026, including determining the appropriate procedure to request binding proposals. On March 13, 2026, CFE is expected to issue formal requests for proposals for the pre-selected projects.

Binding proposals will be submitted and evaluated between March 13 and March 31. The process will allow for site visits, detailed questions and answers, and rounds of negotiations with qualifying parties. Project award and contract execution are scheduled to occur between April 1 and April 26.

Within six months after contract execution, but no later than October 30, 2026, projects are expected to secure permits and interconnection studies, reach financial closing and formalize the financial vehicle required for implementation.

Given the short timeline for the selection process, the details of the material contracts such as the PPA, management services agreement and O&M contract will probably be negotiated after the projects have been awarded.