Capitalizing on Traditional and Alternative Fuels

Q: How is Mexico’s role in Caterpillar’s LATAM strategy evolving?

A: Latin America, and particularly Mexico, is playing an important role in our business strategy. We foresee increasing demand in emerging countries so enhancing our presence in places like Mexico is one of our top priorities. Our Electric Power Division has experienced great success in Mexico, installing a number of projects and becoming a leading player in new energy applications, particularly biogas. We also have a number of projects running on landfill gases in Aguascalientes, Durango and Chihuahua, as well as some that use cattle manure. One of our flagship projects in this area is the system we installed for PROAN, which is the second largest egg producer in the world, delivering around 25 million eggs per day. The majority of PROAN’s electricity needs in Mexico are covered by 40 Caterpillar gas gensets installed at its farming facilities located in San Juan de los Lagos, Jalisco.

We are optimistic about the future of our natural gas-based equipment, which is the most common fuel at the moment, due to the government’s plans to expand Mexico’s pipeline system. We already have 200MW running in Mexico, which are powered by Caterpillar’s gas gensets imported from the US and Germany.

Q: Why did Caterpillar start offering financing solutions and what distinguishes those from other financial entities?

A: Caterpillar decided to open a special project financing division to support its customers in different industries. Caterpillar Financial Services is based in Nashville, Tennessee and has special departments for different industry applications. As for Mexico, the main offices are located in Monterrey. As part of Caterpillar’s Electric Power Division, we work with the financing department to support the development of projects using Caterpillar engines. That Caterpillar is fully or partially financing the venture gives our clients a higher degree of certainty that the project will be completed and run successfully. By incorporating financing into our offer, we can support our customers during all stages, including design, construction, O&M and dismantling. This way we have stronger control over parameters that could negatively affect the project, diminishing the risks associated with them. In Mexico, we have used our company’s financial services to develop power plant projects running on natural gas, landfill gas and biogas, which have turned out successfully.

Q: What were the results of Caterpillar’s flagship project with Altos Hornos de Mexico (AHMSA)?

A: We have developed two plant projects with AHMSA, the largest steel manufacturer in Mexico. Both consisted of 10 4MW gensets running on natural gas. In both cases we worked with our local partner Madisa, which is in charge of the region where AHMSA is located, to provide designing, construction and O&M services. The whole project is supported by our manufacturing plant in Germany. The installation phase of the first plant took 12 months and our customer has been successfully running the project for the past two years. We also provided a second power plant. Those projects were fully financed by Caterpillar Financial Services, including the purchasing of the gensets, electric equipment and the natural gas connection to the plant. The first plant’s ROI was reached in less than one year, which is not surprising considering that steel manufacturing is a highly energy intensive process. AHMSA was completely satisfied with the results of the project, opening the door for new business opportunities.

Q: How is the Energy Reform impacting the opportunities for Caterpillar’s Electric Power Division in Mexico?

A: The Energy Reform and the publication of the secondary laws offer great potential to new business opportunities but they have also resulted in a lot of confusion in the market. Natural gas is the market niche where we see the greatest potential in Mexico through small and medium cogeneration plants. CFE is already building a number of power plants to supply peak demand.