CFE and Moody’s Weigh Mexico’s Energy Transition, Challenges

Mexico’s electricity sector is navigating a delicate trilemma of transition, justice, and security. With the government’s ambitious 2025–2030 expansion plan for the Federal Electricity Commission (CFE), the commission is under pressure to secure financial stability, accelerate the integration of renewables, and ensure system reliability as demand surges from industrial growth and new energy-intensive projects like data centers. Panelists at Moody’s Inside Latam: Mexico 2025 emphasized that while opportunities are substantial, the road ahead is fraught with financial, operational, and regulatory challenges.

Balancing Business Viability and Energy Transition

For CFE, the challenge begins with its dual mandate, to operate as a financially viable company while serving as the backbone of Mexico’s energy sovereignty. “We cannot, before our creditors, before the markets, stop being profitable,” says Eugenio Amador, Chief Financial Officer, CFE. “We must cover operating costs, new investments, and have a clear business vision.”

That business vision is inseparable from the energy transition. Amador underscored that 75% of CFE’s upcoming investments will be directed toward renewables, building on a 32% renewable share of the generation mix with a goal of reaching 38% by the end of the administration. The company is pursuing wind, solar, battery storage, and cogeneration projects, part of a 51-project portfolio announced earlier this year by President Claudia Sheinbaum, with an estimated investment of US$22.4 billion and the addition of 22,674MW of capacity.

Still, the transition cannot be divorced from financial discipline. “It is really about balance, healthy finances, ensuring our investment capacity matches our debt capacity, and seeking new mechanisms such as physical schemes,” said Amador.

Innovative Financing and Market Tools

CFE’s expansion drive will require record levels of capital. The utility is turning to new financing models, including joint investment schemes that adapt global best practices. These arrangements allow CFE to hold majority stakes in projects while avoiding the consolidation of project debt onto its balance sheet. “One of our important goals is that in those schemes where we participate, we do not consolidate the project’s debt,” says Amador.

The company is also broadening its access to capital markets. In August, CFE issued a US$725 million Fibra E bond internationally, a move it hailed as a success and a sign of investor appetite. More issuances are planned, with the company targeting an additional capital raise in 2026 to fund transmission projects. “We are going to continue diversifying our sources of financing,” says Amador. “Yes, we will use our balance sheet, but also fibers, markets, and joint ventures.”

These financing mechanisms will be critical for supporting not just new generation but also the strengthening of the national transmission grid. In August, the government announced an US$8.2 billion investment to build 275 new transmission lines and 524 new substation projects, designed to benefit 50 million users and relieve one of the system’s most pressing bottlenecks.

Rising Demand and New Consumption Patterns

The urgency of these investments is underscored by shifting demand dynamics. Mexico’s industrial expansion, nearshoring trend, and digitalization are fueling a steep rise in electricity consumption. “Data centers are not foreign to our planning,” says Amador. “We are working hand-in-hand with the Ministry of Energy to anticipate the demand from companies that are positioning themselves in the Bajío and other regions.”

Moody’s analysts see the demand outlook as both a challenge and an opportunity. “The Mexican electric sector is in a moment of many changes,” says Diego González, Assistant Vice President Analyst, Moody’s Ratings. “CFE faces very high investment needs. But there are also positive aspects and opportunities emerging in this new administration.”

The most pressing concern, González explains, is system reserves. During the 100 hours of peak summer demand in 2024, reserve margins fell to just 500MW, down from 5,000MW to 6,000MW in past years. “This is a critical situation. It is not sustainable. It has to be addressed,” he warns. Moody’s estimates that Mexico will need to double its installed capacity over the next 15 years to meet demand, making CFE’s US$30 billion capital program not just ambitious but necessary.

Regulatory Shifts and Private Sector Role

The new regulatory framework places CFE firmly at the center of the system, with a mandate to maintain at least 54% of generation capacity, leaving up to 46% for private participation. González frames this as a pragmatic evolution: “These new schemes show a change from the previous administration, looking to close investment gaps with private capital. It is positive, but they are new mechanisms with no track record.” 

Private firms are expected to participate in CFE’s mixed contracts and joint ventures, though their role will be tightly circumscribed. For international investors, clarity remains essential. González cautions that while the fundamentals are strong, “when you combine this with judicial reform, it does create uncertainty for international investors in a sector that is by nature very long-term.”

Nevertheless, if the new regulations succeed in establishing clear rules of the game, they could create a more predictable environment for collaboration. “As long as the rules are clear, this can be very positive,” says González.

Credit Outlook and Financial Management

According to Moody’s, CFE’s credit profile reflects both vulnerabilities and progress. CFE holds a Baa2 rating with a negative outlook, aligned with Mexico’s sovereign rating and based on the assumption of extraordinary government support if needed. Yet on a standalone basis, CFE has shown improvement. “Relative to past years, financial metrics have gradually improved, mainly due to demand growth and stabilized natural gas prices,” says González.

Moody’s views CFE’s US$30 billion CAPEX plan as manageable, assuming execution risks are contained. “It exposes the company to risks of delays and overruns, but we do not believe it will affect the credit rating,” says González. “We think the execution of these programs is manageable and does not affect the credit profile at this point.”

Transition and Competitiveness

González and Amador say that integrating more renewables into Mexico’s generation mix is vital not only for sustainability but also for competitiveness. “Electric generation in Mexico is very concentrated in gas, and it is cheap,” says González. “Adding more renewables would reduce dependence on natural gas, diversify costs for CFE, and, from a credit perspective, it is positive.”

Access to clean power is also critical for attracting multinational investment. “Companies looking to invest in Mexico already have carbon-neutral goals,” says González. “The availability of renewable electricity is extremely important for competitiveness.”

A Sector Redefining Itself

Mexico’s electric sector is redefining itself under new political leadership. For CFE, the task is to execute a historic investment plan while maintaining financial discipline, strengthening the grid, and accelerating the transition to cleaner sources.

CFE must play a careful balancing act, says Amador: it must behave like a company, while serving as the public utility charged with delivering energy sovereignty. That means embracing innovative financing, attracting private partners where feasible, and executing on an ambitious project pipeline.

For Moody’s, the watchword is execution. Demand is rising faster than supply, reserves are dangerously thin, and new regulatory schemes remain untested. Yet the fundamentals are strong, and the expansion plan could redefine the sector for decades to come.