Anticipate Before it Happens

Q: As advisers, what role does a firm like Baker-McKenzie play in the changing Mexican energy market?

A: Energy is an industry in constant flux. At a global level, it is undergoing a rapid evolution, not only from a policy standpoint, but also driven by technological innovation. In addition, the demand for higher profits motivate a constant need to adapt to new environments. In Mexico, this does not only pertain to the political transition in the country, but refers to a trend at the macro-economic level. Regarding the Mexican case, we have to acknowledge that the rules of the game have not changed. The policy approach has evolved to provide greater relevance to the social dimension, an aspect that should be a fundamental piece of every energy project and which this administration strongly supports. Apart from that, the regulatory framework has remained intact, meaning a spirit of free competition based on autonomy, certainty, transparency and investment.

Our role as advisers is to continue studying these guidelines because there will be a series of administrative dispositions and decrees issued during this sexennial. In a constantly changing environment, it is our job to help our clients understand the new paradigm, as well as the administration’s expectations for private investors.

Q: What business opportunities will emerge in Mexico’s energy market in 2020?

A: There are many opportunities ahead, and not necessarily those we were familiar with in previous years. While the long-term electricity auctions and bidding rounds are currently paused, the WEM is up and running. In addition, there are a series of projects derived from the auctions that still require a variety of services. From the consumer side, major off-takers have gone through a learning curve and are at a point where they can make strategic corporate decisions about their energy supply options in collaboration with power generators and qualified suppliers. While this model already existed under the self-supply scheme, to date there are dozens of companies that are satisfying their energy needs in different load centers through different models. Energy infrastructure projects with CFE are also in the spotlight because private companies will provide services in the development, construction, support and management areas. In addition, as energy sovereignty is a priority for this administration, we expect major investments in the construction of LNG plants and storage facilities. Finally, in a transformational market, the entrance and exit of assets as well as players will also define this period.

Q: How will Baker McKenzie support its clients in seizing these opportunities?

A: At the moment, we are busy working with our clients on the implementation, development and execution of our successful auction projects pipeline. Another area that demands a great deal of support is advising various energy consumers in the decision-making process of consolidating energy supply contracts. Growth in this area will remain constant because the process is becoming more agile and dynamic as the segment matures. In previous years, these players needed to understand the market’s dynamics, but many are now deciding energy supply proposals by themselves. As such, our support will be on the regulatory and contractual side.

As the industry diversifies, we will be more involved in sustainability and climate change topics like the carbon credit market. When this pilot program is launched, we will be working closely with development banks and governments at the municipal, state and federal levels. This market is set to boom in the next five years but its inception will take place in 2020. When an industry undergoes a rapid transition, we need to adapt internally as well. As a legal firm, we have the responsibility to understand these changes in advance to better advise our clients. This does not only refer to regulatory aspects that impact the energy industry directly but also other areas, such as labor rights, intellectual property and data protection.

Baker McKenzie is a leading global law firm. The firm partners with its clients to deliver solutions in the world’s largest economies as well as newly opening markets. It works across a number of industries, including energy, with a range of practices from antitrust and competition to intellectual property and compliance.