Energy as a service, PPA or BOOT: which fits your plant

First, separate two decisions

When a company evaluates a power plant, it tends to mix two different questions. The first is who invests in the plant. The second is how your company pays for the energy it uses. As long as both go together, the only option seems to be buying the plant.

A special purpose vehicle (SPV) separates them. GIS Power develops each project in its own SPV: the company owns the plant, raises the debt and equity, and sells your company the energy or the service under a long-term contract. With that piece in place, there are four possible models. Contract terms run from 48 to 180 months, depending on the scheme.

The four models

1. Power purchase agreement (PPA)

The SPV builds, owns and operates the plant. Your company signs a contract to buy the energy the plant produces, at a rate agreed from the start with whatever escalation rule the parties set. You do not invest or take on maintenance; you take on a purchase commitment for the term. It fits when demand is stable and operations will stay at the site for the whole contract.

2. Energy as a service

Instead of paying per kWh, your company pays a monthly fee for having the capacity available and the plant running, with performance indicators in the contract. If the plant misses the agreed availability, the contract reflects it. What you buy is continuity. It is the natural model for loads that cannot stop, such as continuous processes and data centers, where an outage costs more than the energy.

3. Build, own, operate, transfer (BOOT)

The SPV builds, owns and operates the plant and collects payments during the term. At the end, the plant passes to your company on the agreed terms. There is no upfront outlay and, when the contract ends, the asset is yours. It fits companies that plan to stay at the site beyond the term and want the plant in the future, but do not want to invest today.

4. Lease, loan or cash

Your company buys the plant and pays for it in installments, through a lease or a loan, or in a single payment. GIS Power designs and builds it and can operate it under an operation and maintenance contract. It is the model that keeps all the savings in your company, because there is no third party charging for the investment. In exchange, the investment and the asset sit on your balance sheet.

Side-by-side comparison

Contract terms of 48 to 180 months, depending on the scheme and the project. The accounting treatment of each contract is set by your auditor.

How to choose: four questions

• How long will you stay at that site? If operations could change or close before a long-term contract ends, a PPA or a BOOT ties you to a commitment you may not be able to meet. With a long horizon, BOOT or ownership leave you the asset.
• Where does your capital earn more? If your company earns a higher return in its own business than a power plant would, it makes sense for a third party to invest. If you have idle balance sheet or competitive credit, buying keeps all the savings in house.
• What does an outage cost you? If one hour without power costs more than months of energy, what you need to buy is availability, and that is energy as a service.
• Do you want to run a plant? In the three models where the SPV invests, operation and maintenance are included. If you buy the plant, the O&M contract is a separate decision.

Some contracts include a purchase option before the end of the term, so it is possible to start with a model where the SPV invests and later become the owner. This is defined when the project is structured. Each model is detailed in contracting models.

The role of the SPV and the trust

The first three models work because the plant does not sit on your company’s balance sheet or on GIS Power’s, but in an SPV with its own contract, its own debt and its own cash flow. For the lender, that means assessing a specific asset; for your company, it means project risk is ring-fenced.

The second piece is the payment trust. Your company’s payments for energy or service go into a trust that pays debt service first and then the remaining items in the agreed order. That is what allows a bank or a fund to lend long-term against a power contract. More in SPV structure.

In return, what the lender asks for is predictable: a long-term power contract with a clear rate, term and indicators; payment guarantees from the user; permits and interconnection resolved before financial close; and a single party responsible for construction and operation. A company that arrives with orderly financial information and well-documented consumption shortens that process.

The 100% deduction: who benefits

Mexico’s Income Tax Law (LISR) allows a 100% deduction of investment in machinery and equipment that generates power from renewable sources, such as solar, or from efficient electricity cogeneration systems, provided the equipment operates for at least 5 years (LISR art. 34, sec. XIII). The rest of the machinery for generating, conducting, transforming and distributing electricity is deducted at 5% a year (art. 35, sec. I).

For that remaining electrical equipment, the Plan México tax incentive decree (DOF January 21, 2025) allows an immediate deduction of 56% in 2025–2026 and 49% in 2027–2030, instead of arts. 34 and 35, for new assets, with a certificate from the Evaluation Committee and a minimum use of 2 years. For solar or efficient cogeneration equipment, the LISR’s 100% is more favorable.

The deduction goes to whoever owns the equipment. In a PPA, energy as a service and BOOT, that is the SPV; the benefit improves project cash flow and can be reflected in the rate or the fee. In a purchase, cash or with a loan, your company takes it; in a lease, it depends on the type of contract. Battery storage (BESS) is not clearly covered by art. 34 sec. XIII, because it does not generate energy by itself: its classification is reviewed with each project’s tax advisor.

In short: if you do not want to invest or carry the plant on your balance sheet, PPA; if what you are buying is continuity, energy as a service; if you want the plant at the end without investing today, BOOT; if you have capital or credit and want all the savings, buy. The right decision comes from your demand, your site and your horizon, not from a preference for a scheme.

Sources

• Income Tax Law (Ley del Impuesto sobre la Renta), art. 34, sec. XIII, and art. 35, sec. I.
• Plan México tax incentive decree, DOF January 21, 2025, arts. First and Second; guidelines, DOF March 21, 2025.
• GIS Power, contracting models: terms of 48 to 180 months, depending on the scheme.

This article is for information only. Each case is reviewed with your tax advisor and auditor.