News
Mexico power auctions set to drive demand for
engineering, construction and financing advice
Lawyers’ role changing as
focus shifts from regulatory
and administrative work
to challenging awards and
modifying contracts
Mexico’s energy auctions are
expected to continue under the
leadership of President Andrés
Manuel López Obrador, with the
result that the nation’s law firms
are anticipating growing demand
for advice on engineering,
procurement, construction and
financing matters.
The nation’s electric power
auctions, which have so far
harnessed $6 billion in investment
in wind and solar projects,
according to government figures,
are still posing major challenges
for developers. Lawyers say
some of the common obstacles
developers face include procuring
financing, permit issues, as well as
local opposition to projects.
The country’s fourth power
auction, which was re-scheduled
to 18 December having been
postponed from November to
allow bidders more preparation
time, will be the first held under
the government of López Obrador.
Yet uncertainty prevails as the
new leader has revealed little
about any plans for more power
auctions, or plans for renewable
energy in general.
“I don’t think it is López
Claudio Rodriguez, Thompson &
Knight
Obrador’s priority to suspend the
auctions, but this is not the same
as providing continuity,” says
Claudio Rodríguez, a partner at
Thompson & Knight in Mexico
City. “I think the new government
understands that renewables
are fundamental to the energy
matrix, and while electricity
does not have the same historical
significance as hydrocarbons
in Mexico, the auctions directly
benefit the consumer, which is in
line with López Obrador’s policy
of benefiting the least-favoured.”
Rodríguez adds: “From the
entrepreneurial point of view, the
auctions signify a billion-dollar
business and a large number of
new jobs, and this should not be
neglected by the government.”
Juan C. Serra, partner at
Basham, Ringe y Correa, says the
Mexican government is unlikely
Mexico’s electric power auctions have raised $6 billion in investment for wind
and solar projects
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• THE LATIN AMERICAN LAWYER • December 2018
to suspend the programme given
its stated intention to increase
electricity generation, though
he adds the plan is “focused
more on boosting hydroelectric
generation”.
However, Rodríguez
acknowledges that would-
be participants in the power
sector will face challenges,
namely procuring financing,
negotiating the environmental
and social permitting process
(at federal, municipal and
state level), procuring land
and access rights, and possibly
encountering opposition from
local communities. For example,
communities in the southern state
of Oaxaca – which is the country’s
wind hub with 27 farms currently
operating and more planned –
have mounted opposition ever
since the first project broke
ground in 2006, and protests and
blockades have subsequently led
to some projects being delayed.
That said, there is a feeling
that sentiment is changing. “We
advise clients on the social impact
of projects, according to Mexico’s
electricity industry law, and we
have seen an increased willingness
on both sides, from developers
and communities, to be more
transparent, just and balanced,
adopting a win-win outlook,”
Rodríguez says. “This has meant
that projects awarded at auction
[since 2016] have not encountered
such opposition, and we hope
that the new government’s social
vision does not rupture the
balance that has been achieved.”
Communities opposing projects
Meanwhile, land acquisition
is also a challenge for clients,
says Serra. This is a particularly
complex issue in Mexico given
that much of the rural land is
communally owned. “We have
so far not seen cases of local or
foreign companies encountering
permit-related obstacles for the
development of renewable energy
projects,” he explains. “The main
problem has to do with social
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