Mexico energy reforms to help increase power generation investments

Sweeping reforms that came into force in the Mexican energy sector this week will lead to higher private sector investment in electric power generation, credit ratings agency Moody's said in a report published Wednesday.

Coupled with constitutional reforms approved at the end of 2024, the regulatory changes "establish a clearer framework and investment models for private sector participants, mitigating the legal uncertainty that prevailed during the previous administration which resulted in the stagnation of private investment," the report said.

The former Andrés Manuel López Obrador administration, whose term ended in October, blocked private investment and focused on strengthening the role of state-owned utility CFE.

Although the reforms of the Claudia Sheinbaum administration enshrine CFE's position as the dominant power company in Mexico, they provide more space for private investment in generation, up to a limit of 46% of power production.

Private companies will also be able to hold maximum stakes of 46% in joint ventures with CFE for power generation.

"The reforms aim to boost the participation of private sector investment in generation," Moody's said.

"It is important to mention that when dispatching electricity from generation plants to transmission and distribution networks, the criterion of cost efficiency will be maintained."