Enrique Giménez
Director General
Fisterra Energy
View from the Top

Anticipating the Evolution of the Mexican Energy Market

Sat, 12/01/2018 - 11:16

Q: How would you rate Mexico’s energy infrastructure?

A: Infrastructure is the backbone of the electricity sector. The reform is a positive step forward for Mexico; considerable effort was invested in it and there is an undeniable sense of quality in its provisions. There are two basic areas for improvement. Firstly, the reform is being implemented and regulated simultaneously, causing some inefficiencies in market operations, generating unease with potential operators and delays. Secondly, markets can be classified under a number of categories. In Mexico, the long-term and short-term energy markets were launched concurrently. In our view, the long-term market has been predominantly prioritized because of the long-term auctions. The picture of undeniable economic success and achieving competitive prices does not reflect the day-to-day reality of the market. This short-term market lacks liquidity due to the scarcity of players operating in it: CFE, Fisterra Energy and a few others.

The first auction targeted the need to foster renewableenergy generation. The effectiveness of resource allocation is questionable because wind and solar-power projects were not launched in areas where the respective resource was not as abundant as in other regions but instead catered to zones where transmission capacity was acceptable or that had power-generation requirements. In this sense, Mexico has the same issue as other parts of the world in terms of network planning. CRE, CENACE and the Ministry of Energy all realize that grid infrastructure is vital in this regard. You also cannot analyze renewable energy without looking at natural gas. A rationalized liberalization requires liberalizing inputs first and consumption second. The reform took the opposite approach by liberalizing electricity first and natural gas second.

The country is making valuable and considerable efforts to strengthen natural gas infrastructure and pipelines, however. Clear examples are found in PRODESEN’s provisions but private initiatives are needed to meet the program’s goals.

Q: What is the comparative advantage of Fisterra’s energy supplier branch?

A: Blackstone, our financial arm, provides the financial solidity our clients look for. Fisterra’s experience in the energy sector is proven, with highly qualified personnel from Spain and Mexican professionals with long careers in CFE that we added to our team. Blackstone also provides an important input from the American electricity market that Mexico also uses. As a result, we can anticipate the evolution of the Mexican energy market because we have seen other markets mature.

We have pioneered the energy financial trading market in Mexico in accordance with the tendencies we have observed elsewhere. We regularly release our forward price curve from one week to five years. Fisterra also helps represent small power producers, from one to 15MW power capacity, that are unable to take advantage of the opportunities presented by the developing regulations. Our company takes the power they generate to the market.

Q: What is Fisterra Energy’s long-term vision for Mexico?

A: Mexico is a developing country with tremendous opportunities in the energy sector. Energy consumption is expected to grow exponentially. Mexico is ranked 15th globally in terms of energy consumption volume. Despite its few mishaps, the Energy Reform is sound. Our newarrival status in Mexico gives us an important comparative advantage. The infrastructure issues we talked about are already being addressed by capable professionals in CENACE and CRE. We want to help them get there. Fisterra already provided the stepping stones toward invigorating the market through financial trading and we have high hopes in the development of this segment. The Mexican Stock Exchange is already taking steps in this direction. Our company is also motivated by the announced midterm auctions. We will continue devising strategies in client attraction, power generation and diversifying our product portfolios.