Cogeneration, Clean Energy Strengthen Mexico’s Power Sector

Q: ContourGlobal's two combined heat and power (CHP) plants in Mexico are vital assets in your global portfolio. How do these Mexican operations fit into ContourGlobal's long-term global strategy, particularly your company's commitment to becoming a predominantly renewable Independent Power Producer (IPP)?

A: We operate two natural gas-fired combined-cycle cogeneration plants with a total gross capacity of 518MW plants in Mexico. These assets form part of our Americas region, where ContourGlobal manages close to 5GW of diversified energy assets and development projects spanning renewable, thermal, and hybrid (solar + BESS) technologies. Beyond Mexico and the Caribbean, our footprint in the region includes Chile, Peru, Colombia and the United States of America. 

We are on a transformational growth path to become an independent power producer targeting an installed capacity of around 10GW by 2030. A key driver of this journey is the expansion of our renewable generation mix, which we expect to grow to around 70% of our portfolio at the end of the decade, up from roughly 30% at the time of KKR’s investment in 2022. 

Q: In late 2024, ContourGlobal successfully completed a US$525 million refinancing of its Mexican portfolio. What does this vote of confidence from investors signify about the stability and strategic value of your assets in Mexico, even amid regulatory changes?

A: The strong interest by investors and lenders reflected high confidence in ContourGlobal portfolio’s robust operational track record and its strategic importance in Mexico’s energy landscape.

The two CHP cogeneration plants in Cosoleacaque, Veracruz and Altamira, Tamaulipas, play a vital role in stabilizing the Mexican power grid by delivering reliable and lower-emissions baseload power. With nearly 8 years of operational history on average, these assets contribute significantly to Mexico’s energy transition and economic growth, offering enhanced energy efficiency and reduced CO2 emissions compared to traditional thermal plants. 

Q: ContourGlobal's CHP plants are classified as clean energy due to their efficiency. How does this classification position you to support the new administration's goal of doubling clean energy capacity by 2030?

A: ContourGlobal’s cogeneration technology uses 32% less fuel and produces up to 30% less CO2 emissions for the same energy output compared to conventional thermal power generation. This kind of cleaner and more efficient energy is needed to provide grid stability, but we of course applaud the government’s position to doubling clean energy capacity and increase the share of renewable power on the grid. In our view, there is no conflict between natural gas fueled plants and renewable technologies, as both are necessary for accomplishing the government’s energy transition goals.

Natural gas, as a low-emissions dispatchable source, is a crucial system to complement renewables penetration. This is recognized in all clean energy transition scenarios, including the IEA World Energy Outlook. Moreover, our plants are strategically located along the Gulf of Mexico, a region that serves as a key energy and industrial hub for the country. The plants cater to the energy demands of large industrial, commercial, and manufacturing customers, benefiting from Mexico's extensive natural gas pipeline infrastructure. 

Q: The new Electricity Sector Law (LESE) reinforces the state's control and mandates CFE's predominance. How does ContourGlobal navigate this new legal framework while ensuring the continued profitability and operational stability of its plant?

A: The reform grants CFE the authority to generate 54% of national electricity without being labeled as a monopoly and mandates that the National Energy Control Center (CENACE) prioritize state-produced energy. As per today, it is not clearly defined how this 54% will be implemented in terms of dispatching, and SENER has mentioned that it will be per merit.  Being a grid-critical efficient cogeneration plant we do not expect changes as a result of this new law. We look forward to working with the government to find ways to continue being a good partner and providing solutions to Mexico.

Mexico is avid for new generation; the private and public sectors need to work hand-in-hand to cover Mexico electricity scarcity. The private sector has the funds to support the Government on its goals. Any public-private collaboration model will need to be analyzed and ensure it has bankable terms and the rule of law prevails.

Q: The nearshoring phenomenon is driving a massive increase in demand for industrial power and steam. How is this trend creating opportunities for ContourGlobal, and what role can your plants play in helping Mexico meet the projected need for an additional 37GW of power?

A: Our plants are very efficient and help the industrial sectors with steam and electricity. Cogeneration plants like ours could support the location of industries in specific regions due to the access of steam for its industrial processes and the excess power generated could be sent to the open market to satisfy the need for electricity elsewhere. 

To continue running and investing in this type of cogeneration plants it is critical that the new regulation considers that these plants have an obligation to provide steam for industrial processes, and therefore their electricity generation, which basically drives the steam-production volume, needs to be considered baseload. 

While the transmission and distribution grid are undergoing much needed expansion and upgrade investments, local generation close to the consumption hubs will be fundamental, so the efficient cogeneration will continue to play a key role in attracting local industrial investments wherever these plants are located. For this reason, supporting investments in these technologies is a way to support the nearshoring.  

Q: What are ContourGlobal's key strategic priorities for its Mexico and Caribbean operations for the remainder of 2025 and into 2026?

A: We are celebrating 20 years as a company and have been a reliable partner of Mexico since entering this market in 2019. We have a long-term focus on the region, and are mostly committed to investing to ensure the operational excellence of our existing Mexican assets to keep contributing to the system with reliable and cleaner power.  In this historical moment for the country, we want to collaborate with the government by transitioning to the wholesale electricity market in an orderly manner, guaranteeing the actual interest of the company and its current self-supply partners. 

Following the recent regulatory changes, ContourGlobal is closely evaluating ways to actively participate in the wholesale electricity market. We believe it is essential to keep open channels of dialogue to coordinate efforts and strengthen our role in the market. The clarity and certainty offered by the new regulation will be critical for cogeneration projects to sustain their operations within a framework that ensures their stable and reliable contribution as an essential component of the power generation system.