Aggresive Strategy Chases O&M ProspectsWed, 02/22/2017 - 15:38
Q: What motivated Eosol to bet on Mexico and what new opportunities have you identified?
A: We are betting on Mexico because we are convinced of the country’s potential. Eosol is used to taking on risk and we have been following an aggressive strategy here. We have invested US$140 million in Mexican projects, US$26 million of which came directly from Eosol. The company also is working on consolidating its recurring revenue streams, such as the O&M contracts we have with third parties.
We see 2017 as a year of great opportunity because the contracts awarded in the first power auction will start construction. According to the auction’s contracting terms, the winning projects need to start operations by January 2018 and will be penalized if they have not done so by July of that same year. We have identified three large corporations with the highest potential to become our clients. They will need O&M services from smaller companies such as Eosol that have experience in Mexico. We are small in size but we are the largest renewable energy operator here, having over 60MW of capacity under operation and 240MW in the pipeline.
Q: What has been your experience operating TAI Durango, the country’s largest solar park?
A: We expected to face bigger challenges operating in CENACE’s northern control area and managing our new relationship with CFE but both processes have been running smoothly. We have had zero unplanned operational stoppages since April 2014 when the first project stage was inaugurated. We have been free of accidents and grid distortion incidents, only stopping operations during routine maintenance services. The 50MW we added in January 2016 have been operating smoothly, following the success of TAI Durango’s first phases. Eosol has avoided operational problems at our facilities, which also benefits grid operator CENACE and CFE, which purchases our energy. In this way, we have contributed to a positive image for renewable energy in Mexico, showing it can operate without having a negative impact on the system.
Q: Why is Eosol migrating projects to the new regulatory plan, given the option to keep them as legacies?
A: We are migrating six of our legacy projects to the new Electricity Industry Law. Government officials expect most of the legacy projects to migrate to the new plan soon, which is logical. We are trying to adapt our company to the new regulation because it is beneficial for all involved. The Electricity Industry Law offers more attractive features than some of the former plans. Self-supply projects are still interesting but the small-producers’ plan in the previous regulation is handicapped because it uses a PPA that was specifically designed for these kinds of projects and is not as favorable as the new pricing rules. The cost of the electricity sold through small-producer PPAs is calculated using the power plant’s average production, which is a disadvantage. Some of our small-producer projects are now selling electricity at January 2016 prices, the month with the lowest production rate in two decades. Because of that we are now receiving US$31 per megawatt-hour, which is below the market price. CRE has not updated the standard prices for small-producer projects as it has not yet defined how they will be calculated without affecting the new market participants. The situation is having a negative impact on our financial balance.
Q: What is your strategy for continued growth and to gain a larger market share?
A: Our main focus is to promote energy consultancy services, particularly those related to O&M, public works supervision and engineering. The construction of a wind farm or a solar park is an anecdotal event that takes between six to 16 months, depending on the size of the project. O&M lasts the project’s entire life span. We are about to start building a 23MW solar park in Coahuila, developed by the Australian Macquarie fund, and we will provide O&M services afterward. Eosol has around 217MW in its pipeline for Mexico, developed and operated by us.