The PEG-5 tender not only redefined the composition of Guatemala's future electricity mix, but also strengthened the country's image among development banks, investment funds, and international financiers, who now see a market with greater potential for channeling capital toward new renewable energy projects. However, for Juan José Dada, Chief Investment Officer of FMO , the success of the tender represents only the first step. The real test will begin when the projects must overcome the execution phase and demonstrate their ability to become operational infrastructure.
The auction awarded 1,258 MW distributed across 57 projects , with a clear predominance of renewable technologies, which accounted for approximately 73% of the allocated capacity. Within this group , solar energy with storage stood out, a combination that solidified a technological shift and sparked interest from financial markets in the opportunities offered by Guatemala.
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From FMO's perspective, the main outcome of PEG-5 was the signal it sent to the international financial community. The competitive process confirmed that Guatemala can structure tenders capable of attracting long-term investments and responding to the evolving needs of the electricity system.
"PEG-5 turned out quite well; it was an excellent surprise and signal to the market. The results of renewable technologies, such as solar with batteries, gained traction," Dada stated.
The executive believed the process yielded a combination of factors that strengthened the confidence of potential investors and ushered in a new era for the market. In his view, the appeal is no longer limited to developers who secured contracts, but extends to financial institutions interested in supporting the financial completion of these projects.
"It has yielded a result that looks exceptional on paper and that attracts a lot of attention from funders or investors who would come to support those who already have the projects," he said.
This interpretation aligns with the analysis of various industry stakeholders, who highlight how the tender consolidated a scheme dominated by hybrid solutions and strengthened the competitiveness of renewable energies against conventional technologies.
Technological evolution is also changing the way investments are analyzed.
According to Dada, projects that combine renewable generation and storage require different financial structures than traditional ones, capable of adapting to new generation profiles, revenue streams, and operational needs.
"We are seeing much more interesting situations where technologies, profiles and energy flows are combined that also allow us to do the same at a financial level," he explained.
According to the executive, this transformation forces funders to develop more flexible tools to support increasingly complex projects.
"We are trying to adjust the structures and capacity of investors to serve these types of projects that already combine generation and storage," he added.
The prominence of energy storage during PEG-5 reflects precisely this evolution. The incorporation of batteries allowed for solutions with greater operational flexibility and a better response to system needs, an aspect that several specialists consider crucial for the country's upcoming tenders.
Despite the technological change, Dada maintained that the criteria used by financial institutions to approve investments remain the same.
Projects must demonstrate technical soundness, economic viability, and the ability to meet their commitments. But the environment in which they are developed remains a determining factor in attracting capital.
"The requirements for investment remain the same as those for any financing, investment, or loan that we traditionally know," he noted.
Even so, he stressed that institutional stability continues to be one of the main attributes that investors look at when evaluating a market.
"The conditions that make the country attractive are stability and security. Predictability is very important, and Guatemala has good international support in the energy sector," he said.
This scenario is now entering a new phase where implementation will play a central role. Although the PEG-5 strengthened market confidence, various industry stakeholders agree that the country's ability to maintain clear regulations and support investment development will be crucial to consolidating that attractiveness.
In recent weeks, for example, renewable energy developers have expressed concern about fees being charged by some municipalities to authorize solar projects , criteria that business associations consider to lack legal backing and which could affect initiatives awarded under the PEG-5 program. At the same time, Guatemala is moving toward implementing a new anti-money laundering law that will raise the bar for corporate transparency and due diligence for companies and investors, an aspect that will become increasingly important during upcoming financing processes.
The challenge: transforming contracts into operational projects
The prices achieved during the bidding process also raised questions in the market about some developers' ability to carry out the committed investments. However, Dada distinguished the outcome of the competitive process from the reality that each project will face during its development.
From his perspective, the auction fulfilled its objective of optimizing contracting and he did not observe any signs of competition that would have driven prices to unsustainable levels.
"We saw a very interesting process and how the prices and allocation of those capacities were optimized. We don't feel it went where it shouldn't have," he stated.
That doesn't mean, he clarified, that all projects will be realized. The analysis will have to be done on a case-by-case basis, considering technical, financial, and infrastructure aspects that go beyond the outcome of the bidding process.
"If that was the case on an individual level, then yes, there could be projects that have problems, but on a general level we think it was a good optimization of what needs to be done," he explained.
In that regard, the executive avoided associating the competitiveness of the PEG-5 with a potential systemic risk to the market. In his view, the main uncertainty lies not in the awarded prices, but in the ability of each development to move toward financial closing and construction.
Having passed the bidding stage, Guatemala enters a very different phase. For FMO, this is where the market's bankability and the country's ability to translate investor interest into infrastructure will truly be tested.
"The auction was a success, but we are now moving into the implementation and execution stage, and that's where things really get going," Dada warned.
The executive noted that each project will have to resolve its own engineering, permitting, financing, and construction issues before becoming operational. Therefore, he emphasized that the success of PEG-5 does not, in itself, guarantee that all of the allocated capacity will be developed.
"Whether all the projects will go ahead or not is another matter," he said.
As he explained, that result will depend mainly on the particular characteristics of each initiative, access to existing infrastructure, and the possibility of structuring competitive financing.
Among those challenges, FMO identifies one that cuts across the entire system: the expansion of the transmission network .
The addition of a significant amount of new renewable generation capacity will require supporting that growth with infrastructure capable of transporting the energy to consumption centers. Otherwise, some of the installed capacity could face limitations in operating at full capacity.
"There are more systemic issues at the infrastructure level, regarding network access and system resilience," Dada explained.
For this reason, he assured that FMO is closely monitoring the evolution of transmission plans and is analyzing alternatives to participate in both generation projects and initiatives related to strengthening the grid.
"Transmission is something we are also paying attention to at the FMO level, to see how we can support it, either within the particularities of each project or in more structured processes," he said.
Their analysis coincides with the current situation in the Guatemalan market. Following the awarding of PEG-5, authorities are moving forward with the design of PET-4 , a tender that will seek to expand the transmission network after the difficulties encountered in the previous call for bids and to support the addition of new renewable energy capacity.
Bankability is built beyond a bidding process.
FMO's perspective sends a message that transcends the outcome of PEG-5. For an organization specializing in infrastructure financing, the bankability of a market depends not only on the success of an auction, but also on the institutional capacity to support the development of investments in the following years.
Along this path, regulatory stability, legal certainty, infrastructure availability, and coordination between different levels of government will be as important as the competitiveness demonstrated during the bidding process.
Dada summarized that vision with a warning that encapsulates the challenge facing Guatemala.
"Without the structure and infrastructure, generation will not be utilized, it will not be able to advance," he concluded.
With a tender that sparked international interest and positioned energy storage as a key player in the new electricity grid, Guatemala sent a positive signal to the market. The next test, however, will no longer be the competitive auction, but rather the country's ability to transform the 1,258 MW awarded into operational projects that solidify investor confidence and sustain the growth of the electricity system.