José Pablo Fernández
CEO
Grupo Dragón
/
View from the Top

Aggressive but Careful Growth Strategy

Wed, 02/19/2014 - 11:15

Q: What were the motivations for Grupo Salinas to enter the crowded renewable energy sector through Grupo Dragón?

A: The original motivation was always the price of energy, but it was also about doing something right for the environment and generations to come. At first, this venture began out of Grupo Salinas’ desire to secure a self- supply scheme but we ended up seeing the opportunity to create our own wind farm. That is how Grupo Dragón was created. Since then, we have been constantly searching for new horizons and new technologies. We have always sought to adapt, while striking a balance between high- tech knowhow and human capital. Grupo Dragón’s adaptation means it takes ideas from the international market and develops them in the context of Mexico and its specific conditions. This involves an element of risk but it is impossible to achieve something if you do not take risks. We are a Mexican company at heart, our staff is 95% Mexican. This means we understand the country’s context and the implications of getting a good project going.

Q: What new opportunities will open up in the renewable energy sector following the Energy Reform?

A: The Energy Reform is only the beginning of the reform process. We will have to work together with the government on the secondary laws, as the private sector has to be more proactive. The door is now open for private firms to be involved after having been closed for 75 years. Eventually, no single type of renewable energy is going to win over the others. In 2014, our projects will expand to seven geothermal projects, four wind projects, two solar projects and our first biofuel project.

Each year, we reassess our priorities and the advantages and disadvantages of every energy source. For example, we chose to develop geothermal energy given Mexico’s potential. In five years, geothermal might be bigger than wind in Mexico, but we first need to reach a point where private companies are submitting enough proposals to the government and where sufficient investment is flowing into the sector. We must consider that geothermal energy is very expensive to exploit, which is stopping it from becoming a major source of renewable energy for the moment.

Q: What new technology is Grupo Dragón harnessing to make wind farms viable in areas which have lower wind capacity than Oaxaca?

A: In order to solve the problem of lower wind capacity in certain areas, we are planning to combine different renewable resources in hybrid projects to get better results. For example, we will combine wind farms with PV solutions or biofuels. The precise way this will be done will depend on the region, as it is crucial to combine these resources properly to reap good profits. This is a very complicated process because of the amount of factors that enter into the equation for hybrid projects. Many areas have to be reviewed, from finding the right blend of technology to involving the local communities.

Q: Grupo Dragón has stayed below the radar in expanding its business. What benefits has this discretion brought you?

A: Due to our corporate culture and the prevailing market conditions, discretion was the right strategy. It allowed us to take our time and pick our projects, rather than have to be chosen by others. We are also able to choose our partners, depending on the specifics of each project we tackle, which enables us to minimize the total cost of ownership and keep the door open to any kind of technology, companies, and suppliers.

Q: What is the typical profile of off-taker that you are looking for?

A: Every consumer of energy is a potential client, from municipalities and AAA companies to ordinary consumers. The difference between Grupo Dragón and other companies is that we do not differentiate between consumers; we take on a wider variety of off-takers than most developers.

Q: What is your growth strategy over the next five years?

A: Grupo Dragón’s strategy is to have very aggressive growth, we aim to install 400-500MW of new capacity in the next five years. However, it is difficult to give precise estimates as we do not know what will happen in the Mexican renewable energy market in the years ahead. Grupo Salinas is not afraid to take risks but Mexico needs to solve a lot of things as a country first. There is too much uncertainty out there, but we will do our best to keep growing.