Adding Value Through Experience and Knowledge

Q: What were the firm’s most important achievements in 2019?

A: We launched our comprehensive digital distributed generation platform in 2019, which was a significant achievement. This digital platform is a financial product related to distributed solar generation systems for the commercial and industrial sectors and involves a network of commercial partners, which are local installers of solar rooftop projects. We place these projects on the platform, allowing our customers to receive quotes and to see all the related financial information, including the project’s financing. The quotes are based on productive chains and prices for equipment, including panels and trackers. The platform allows our customers to be much more competitive in the market.

Through our digital platform, we can also bring together a group of installers, certify them under international standards, and provide them with the means to do their work using the highest global quality standards while optimizing their costs. The platform has been quite productive, performing well in the market since its launch. There are two essential facts that we consider in a project: the price and the quality.

Last year, we also began construction on our first utility solar project: the 36MW Tampico solar project in Guanajuato. Planning the project from start to finish allowed us to explore the financing strategy for the entire project by approaching potential investors. Another achievement was the development of a twin project near Tampico called PROTEUS. We are now ready to build and have launched the EPC bidding.

We also finalized the purchase and development of a project in Baja California Sur. It is also a solar utility project with a storage element. The storage is necessary because the energy distribution network in Baja California Sur is completely isolated from the national connection network and batteries are required to balance the energy inputs from related plants. Adequate storage is necessary to deliver a stable flow of energy. This requires a complex engineering design and implementation, which represented a significant challenge to the Prana Power team. This project is also ready to build and construction is expected to start by midyear.

Furthermore, we were able to introduce our products in the natural gas market. Several projects were explored through Artha Capital, our parent equity administration firm. We worked on a combined cycle power production project, which represents a very different kind of challenge given the technical features compared to solar.  However, it is a similar approach when it comes to development. 

All areas of Prana (development, legal advice, technical, commercial, and business strategy) are working together on these projects to offer services to our sponsors' platforms and to foreign investors who want to enter the Mexican market. They want to partner with a firm that will help them develop a project under a specific formula, with detailed technical specifications.

Q: How would you define the added value that Prana Power provides the Mexican market?  

A: Prana´s added value is experience and knowledge in the complete chain of project development. We have projects that are in different stages, projects that are in the early stages of development and projects that are in the ready-to-build stage.

We have experience in financing, setting-up commercial projects, signing PPAs, and signing term sheets with international entities that have wanted to do business in Mexico and have chosen Prana to be their developer. We also have experience in the wholesale electricity market with qualified suppliers. We understand the market and we are advisers to potential off-takers.

Q: What impact has the new regulatory framework had on Prana Power’s operations?

A: The biggest obstacle we have faced is uncertainty within the sector. There have been many government statements that have confused the issue regarding CELs, portage, and commercial advantages. This uncertainty was also due to pending issues with CRE in terms of project permissions and pending modifications to the legal framework. Since CRE has had no session dates, we have not been able to consider authorizations in our plans.

Those circumstances created an atmosphere of uncertainty, especially among our clients. Commercially, we were already reaching specific agreements with potential clients for long-term contracts. Our clients were convinced to sign with us because they understood they would have commercial advantages related to the acquisition of electricity. For many of these companies, the biggest concern is having certainty regarding energy supply. For some time, it was not clear to them whether Prana was going to be able to deliver energy or not. At times, we have had to look for specialists to assure our customers that what we were saying was valid and to clarify any questions they might have.

Q: What is Prana's strategy to reconcile changes to energy regulations and to handle the increasing demand for electricity?

A: Uncertainty is decreasing. We understand that the government has wanted to implement many new things and we realize that the country's energy demand continues to grow. Any modifications regarding contracts already agreed upon has important implications and the industry is not going to just stand around with arms crossed. Energy industry investors are still doing business, and continue to seek investments and promote Mexico´s economic development.

Prana is adding value to the supply chain by generating jobs at the local level, creating value within the country's energy matrix, seeking to meet Mexico's objectives in terms of international agreements, injecting investments that promote development and following the rule of law.

Q: What have been the main challenges for Prana Power in relation to financing and investment management?

A: The distributed generation and project finance market in Mexico have significant limitations; for example, the size of every energy system. If we go to the distributed generation scheme in Mexico, the maximum that can be installed per project is 499.99KW, which was established many years ago when the distribution generation market was just emerging in the country. The potential of distributed generation is huge. Without the current limitation, the distribution channel could be 10 times bigger than what it is today. 

For us, the biggest challenge has been to present to clients investment projects that have potentially attractive returns. In the US market, for example, you have more options regarding how you take advantage of rooftop generation, the application of the concept of solar communities, which we are trying to bring to Mexico, utility independence through micro-grids, and many other developments that have not taken off in Mexico in terms of distributed generation.

Q. What are Prana Power’s objectives for 2020?

A: At the end of 2019 we were still installing our digital platform and training people. Today we have a very well-designed platform with the potential to grow. The expected growth of internal distributed generation is 100 percent and we want to double the number of installed energy systems this year. This means we would have installed almost 40MW by the end of the year. We also strive to efficiently manage the control and monitoring of installed projects.