Despite Mexico's regulatory changes in the power market in the past few months, industry insiders claim at IJLatam 2020 – IJGlobal's Latin America energy and infrastructure conference – that the market may have slowed down... but it's not closed. 

Starting in the spring, Mexico's administration put forth several measures to limit the development of renewable energy assets in the country, worrying both lenders and sponsors who saw their assets' revenues threatened.

Grid operator Cenace halted work to interconnect wind farms and solar parks, leading to potential losses for private companies holding power purchase agreements (PPA), and the Secretariat of Energy introduced further measures to limit development.

Still, deals have slowly moved forward in a market that is "not completely paralyzed," says Javier Gomez, vice president at insurer AXA XL on a panel at the IJGlobal virtual conference to replace the famed Miami event that was cancelled in March due to coronavirus. 

Projects with PPAs awarded during the third auction in November 2017 are still in the process of being financed, while some merchant projects are in the making, he notes. "I don't see a complete stop on the market."

Rafael Villergas, director at ING Bank, agreed that some projects have experienced problems because of delays and the regulatory changes.

That situation has been common for project finance deals that were looking to close in the spring. Financial close for IEnova and Saavi Energia's 108MW Energia Sierra Juarez II wind farm was initially penciled for March (2020), but was postponed for the end of summer.

The same occurred to the financing of a solar duo owned by Korea Electric Power and Sprott Korea – both of which have 2017 government PPAs. Financial close is scheduled for this month, although it was expected to have closed in April.

However, warned Gomez, industry participants should look out for Mexico's sovereign credit rating, which suffered a downgrade in March and the mid-term elections that will take place in June of 2021. 

The downgrade will directly impact the offtaker – state-owned Comisión Federal de Electricidad – in the government power auctions. It could lead investors to flee the country and increase pricing, opening up the market for M&A opportunities.