VIEW FROM THE TOP
CONFRONTING MEXICO’S ENERGY INFRASTRUCTURE CHALLENGES CARLOS OCHOA Partner at Holland & Knight
Q: What challenges are developers facing in constructing
for projects that were no longer developed, however for
new energy infrastructure?
matters of control and reports the national electric grid
A: Real estate, interconnections and obtaining PPAs are
is “virtually” busy.
the largest challenges developers are facing. real estate is a unique challenge in the Mexican market. The first
In this regard the role of the regulators, particularly
thing we have to do when a new developer enters the
CRE, will be of the upmost importance, since they will
market is explain the different types of real estate rights
have to terminate, as they are currently doing, permits
regimes in Mexico.
granted under the former regime that does not comply with the requisites stablished in the transitory articles
It is hard for foreign companies to understand how the
of the Electric Industry Law, which will result in the
Agrarian Law works and why it makes it so difficult to
decongestion of some areas of the national electric grid,
obtain land. About five to 10 years ago, there was a
giving opportunity to the development of new projects
misinterpretation of the Agrarian Law and banks would
in certain areas of Mexico. Now, with the current regime
automatically reject projects that touched upon this issue.
there will not be space for speculators, since guarantees
If agreements are well drafted from the beginning and the
must be filed for the interconnection.
process stablished within the Agrarian legal frame work is followed, then there should be no problems to secure
Q: Why has there not been any Fibra Es issued for energy
agrarian land for the development of these generation
and transmission projects.
A: We do not have enough projects in Mexico to issue a Fibra E. There was an effort made for midstream pipelines,
It is hard for foreign companies to understand how the Agrarian Law works and why it makes it so difficult to obtain land
but it did not go through. The only projects that I can envision being part of a Fibra in the short term are those that have been built through the former system. The only players that could raise a real Fibra would be PEMEX, CFE or the major utilities with a long-term presence in Mexico. Q: How would you evaluate the development of social and environmental impact studies (EIA and EIS)? A: The sector is facing various problems when it comes to EIA and EIS but there are many companies that have been
Another thing that worries developers is that they do not
doing a great job. This was something that needed to be
have certainty on interconnection processes. In the past,
included in the Energy Reform. In terms of real estate, giving
these processes would be carried out through CFE but
back to the communities and environment is an important
now it must be done through CENACE. The problem was
factor in the development of infrastructure. In the oil and
that under the former system, this process had no cost,
gas sector it is a lot more noticeable than the power sector.
therefore many developers filed for their feasibility study, Because developers must now give royalties to the landowners, they feel that they are part of the project Holland & Knightis an international law firm specialized in
and that they have a say in the development of their
Mexico’s growing power and oil and gas industries. Its team
surroundings. What we have seen in the power sector is
has extensive experience in areas that include environmental
that now some land owners are asking to have the same
law, public bids and contracts, antitrust and project finance
agreements that exist within oil and gas.