Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

the mexican oPF model
. The experience of Mexico points to the effectiveness of a somewhat 
different PPP scheme called OPF (Obra Publica Financiada). Similar to the Philippine model and the 
BOT model used for some projects in Mexico itself, the state power company CFE has the mandate 
for geothermal exploration and development. However, unlike the BOT model where the private 
participant constructs and operates the power plant for a number of years, the OPF model involves the 
private participant only until it constructs and commissions the power plant, which is to be owned and 
operated by Federal Commission for Energy (CFE).
Specifically, CFE develops the steam field, completes the pre-design of all the necessary components 
of the power plant (including the plant itself and associated transmission connections), obtains 
necessary permits, and then puts the project out for public bidding. The winning private contractor 
finances and carries out the detailed design and construction of the project and then transfers the 
completed project to CFE for operation and maintenance. The CFE pays the contractor the total 
amount of the contract after the transfer and resorts to private or public financing institutions for long-
term financing to pay the contractor. The risk for the private sector is limited to short-term financing 
over the construction and commissioning period and to guarantees for the equipment. It does not 
include any risks related to geothermal reservoir or drillings.

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G e o t h e r m a l H a n d b o o k : P l a n n i n g a n d F i n a n c i n g P o w e r G e n e r a t i o n 
Under this scheme, CFE has more control over specific technology choices (by virtue of its leading role 
in the pre-design phase and the public tender) and over the credit arrangements for the construction 
of the power plant. CFE takes full responsibility for the resource risk and allows the private sector 
to compete for a turnkey (engineering, procurement, and construction or EPC) contract, where the 
private company’s risk is short term (construction period only). The aim is to combine the technological 
capabilities of the private sector with the public sector’s credit resource (World Bank 2004). 
B O x 3 . 6
Iceland’s Public Insurance for Geothermal Risk
In the 1960s, Iceland introduced a pioneering public insurance scheme for geological and financial risks 
related to geothermal drillings. The National Energy Fund (NEF) was created by the government to provide such 
insurance. Once a drilling plan was approved by NEF, the Fund would reimburse up to 80 percent of the actual 
costs of unsuccessful drillings. NEF was replenished on a regular basis and, later on, included grant support for 
geothermal development, mainly for exploratory activities. 
The role of the insurance from NEF was especially critical in the first three decades of geothermal development in 
the country. As the Icelandic industry became more experienced, with fewer failures in drillings and dry boreholes, 
the Fund became less important for the development of new projects. It is worth noting that to date all power 
generation in Iceland has been developed by public companies and utilities.
Source | Authors.
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Depending on the contractual structure of the PPP/concession, the ownership in the assets may either revert to the public sector or remain 
private in the case of BOO or “pure IPP.”