Cementing Alliances for Emerging MarketsWed, 02/22/2017 - 10:42
After savoring success in the Chilean market, Pattern Development, a renewable energy developer based in San Francisco and Houston, looked at Mexico as the next logical step to continue its Latin American expansion. The company expects electricity demand here to keep growing and sees more opportunities arising in line with the government’s bold energy targets. “Mexico fits very well in our goal of entering strong and attractive markets,” says Glen Hodges, Country Manager of Pattern Development. “Both the economy and electricity demand are growing and we expect this trend to continue in the future. Additionally, Mexico needs to substitute old and inefficient power plants with cleaner facilities and the government has set ambitious goals regarding clean energy usage. All these factors are crucial drivers behind our commitment to Mexico.”
The company has already developed 19 projects globally, accounting for almost 3GW of wind capacity and is looking to add 1GW in Mexico through greenfield developments of solar and wind projects as well as strategic acquisitions. “We have a primary focus on greenfield development but we also intend to acquire some projects already in advanced development stages. We are particularly looking for clean energy projects that are located in interesting nodes and have solid land rights and good interconnection facilities,” he adds.
The main challenge for ambitious companies in Mexico is to cope with specific aspects of the local energy industry while dealing with a different business culture. “The basics of wind farm development do not vary much from country to country but there are certain aspects that differ considerably, particularly those related to bureaucratic and legal processes such as land rights acquisition, permit issuance or interconnection,” says Hodges. For Pattern Development, finding a compatible partner helped accelerate the process. “We looked for a partner with the skills and experience needed to help us move up the learning curve faster and we found it in CEMEX Energía.”
CEMEX Energía is the energy division of CEMEX, one of the world’s largest cement producers that has developed over 1GW of generation projects in Mexico, being a pioneer in the development of energy projects under the self-supply scheme. The company has experience both as an off-taker and a supplier, which drove it to establish its energy division at the beginning of 2015. According to Hodges, “the joint venture between CEMEX and Pattern Development was a mutually beneficial decision. We were looking for a strong Mexican partner to start our business here while CEMEX Energía was looking for an alliance with an experienced and well-capitalized renewables development company to help its ambitions in the energy sector.”
CEMEX Energía leads the way in real estate, permitting and interconnection aspects while Pattern Development takes the lead on issues such as meteorological prospecting, wind measuring, engineering and design and equipment procurement. Marketing and project financing are handled jointly, he adds. Pattern Development also brings to the table its credentials regarding project financing. It has a proven record of providing access to long-term equity and financing through its affiliate Pattern Energy Group, publicly listed on the NASDAQ and Toronto exchanges. Pattern Development is financially supported by Riverstone, an energy-focused private investment firm.
“Riverstone is Pattern Development’s primary investor,” says Hodges. “The capital and business expertise it has brought to our company have been essential to our success. Project development is risky so it is important to have financial backing from experienced investors.” He believes CENACE’s power auctions will represent the largest business opportunity for project developers in the near term, but bilateral transactions with private off-takers will become more important as the market evolves.