This past July 28, 2017, the Mexican Ministry of Energy (Secretaria de Energia or SENER) published the guidelines for the Financial Transmission Rights (“FTR”) Auctions (the “Guidelines”). The Guidelines or Manual de Subastas de Derechos Financieros de Transmisión underwent public commentary and several drafts before the final, enforceable Guidelines were published. The Guidelines govern the auction process for the newly created FTR market. Below a few highlights:

1) Auction Phases. FTR auctions will be conducted in two phases. Phase One. Auctions for FTRs with a one year term will be conducted under a simplified auction process. These auctions will occur annually, between October and November of each year and the FTRs auctioned will be effective from January 1st to December 31st. Phase Two. Auctions for FTRs with advanced specifications and with terms equaling 3 years, 1 year, seasonal (quarterly), and monthly will be held separately.

The Guidelines did not include the official dates and timelines for auctions. However, the Centro Nacional de Control de Energía (“CENACE”) is required to publish the FTR auction schedule to the wholesale power market system (“MEM”) at least 6 months prior to the offer period for annual auctions and at least 2 months prior to the offer period for monthly auctions.

2) Short Term FTRs. As part of the first FTR auction, CENACE may auction FTRs with limited one-month terms in order to encourage participation of Market Participants.

3) Registration. The Guidelines reaffirmed the FTR auction market participation requirements set forth in the regulations issued last year titled “Guidelines to Registration as a Market Participant” (Manual de Registro y Acreditación de Participantes del Mercado). To participate in FTR auctions, an entity must register with CENACE as a Market Participant and provide a compliance guarantee.

4) Bilateral Transactions. One year after the first annual FTR auction, private entities will be permitted to sale and trade FTRs (“Bilateral Transactions”). For Bilateral Transactions, CENACE’s role will be limited to operating the trading platform and notably, will not include participation in negotiations or establishing prices. However, parties must report Bilateral Transactions to CENACE to enable tracking and registration of such trades.