December 15, 2017

Mexico to Bid P3 Contract for Private HVDC Line in Baja California

Holland & Knight Alert
Carlos Ochoa

Under Mexico's Energy Reform of 2013, the power industry opened investment and contracting opportunities that were once reserved to the State. In case of transmission and distribution activities, the Mexican State still keeps control, but it is allowed to contact with private parties for developing infrastructure and sub-contract services as well as forming public-private partnerships (P3s), among other models.

In January 2018, Mexico's Ministry of Energy (Secretaría de Energía, or SENER) will launch an international tender for awarding a P3 contract with the National Center for Energy Control (Centro Nacional de Control de Energía, or CENACE) for the winner to design, finance, build, install, maintain, manage and operate the infrastructure (DFBOT). At the end of the 30-year contract term, the assets may be transferred to the private contractor, a third party or placed in a new tender for a new P3 contract.

The line will connect the Isolated System of Baja California with the National Interconnected System (Sistema de Interconectado, or SIN). It will be a point-to-point, high-voltage direct current (HVDC) line from Mexicali (Cucapah substation) to Hermosillo (Seri substation) that will have bipolar transmission and operate with a capacity of 1,500 megawatts (MW), a tension level of +/- 500 kilovolts (kV) and an estimated length of 435 miles (700 kilometers).

The project will be repaid with the regulated tariffs to be paid by participants of the Wholesale Power Market (Mercado Eléctrico Mayorista, or MEM) using such infrastructure as approved by the Energy Regulatory Commission (Comisión Reguladora de Energía, or CRE).

If launched in January 2018, the dates to present the bid proposals and awarding the project would be July 2018 and September 2018, respectively.

Additional Considerations

It is expected that SENER will launch other projects to consolidate the remaining two isolated systems located in Baja California Sur (Electric Systems of Mulegé and Baja California Sur).

In addition to these projects, it is important to keep track of all investment possibilities from the new capacities of the grid, as well as businesses that could come to reality thereafter.

Holland & Knight's energy law attorneys have extensive experience on matters in the power industry, including a variety of projects in the transmission and distribution sectors. To discuss this or other power projects, contact Holland & Knight's Mexico City office.  


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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