Camilo Serrano
Country General Manager
Atlas Renewables Energy
View from the Top

Deep Knowledge and Local Bonds Crucial for Projects

By Cas Biekmann | Wed, 04/22/2020 - 12:15

Q: What opportunities has Atlas Renewable identified in Mexico?

A: With the implementation of the Energy Reform, we were fully involved participating in the government sponsored auctions, but over the past 2 years we have started exploring new opportunities in other markets, such as the bilateral one. It is a market that is still developing and will grow significantly with potential clients that could consume energy directly from renewable energy power plants due to its competitive prices and the huge sustainable component that it entails. These clients could be industrial consumers or entities commercializing energy as an intermediary. We have some promising prospects that we hope will materialize during 2020.

Q: You offer a complete cycle of competitive costs. How does the company guarantee this?

A:  We tap into the market to understand energy prices with the goal of offering a more competitive and efficient solution to large off-takers. We see technology as a great differentiator in the services we provide. We’ve established strong alliances with our suppliers, EPCs and panel providers, and we strive to be at the forefront of innovation by understanding and analyzing the most promising technologies in our field. Furthermore, given that suppliers offer different technological solutions under different conditions, we’ve created an in-house laboratory within one of our operating plants, where we can test and evaluate the most promising technology in our industry to determine which option is the most competitive. We spent a year building this lab where we mostly test and compare different modules and install them in a variety of configurations. This has allowed us to not only make very accurate assumptions about the efficiency of new technologies when implementing it into our projects but also create substantially more cost-efficient and tailor-made solutions for our clients.

Financially, we have also found unique and novel deal structures thanks to our team’s deep understanding of the industry across the region and to our excellent financial track record working alongside prestigious and credit worthy institutions in financing our projects. The combination of our technical expertise with our bankability has allowed us to be versatile and agile in securing competitive structures to finance our projects, offering our clients even more reliability and ease-of-mind.

Q:  How would you describe your experience in Mexico in relation to PPA auctions?

A: We acquired our first project in Mexico from a developer that won the first auction of the Energy Reform. This year, we will start to build a second project that also stems from an auction. With bilateral PPAs, we aim to replicate the success we have had in other markets. In Chile, for example, we signed PPAs with mining and utility companies. In Brazil, we’ve developed great solutions for the industrial, mining and petrochemical sectors and we’ll be soon building state-of-the-art solar plants to satisfy our clients energy needs at very competitive prices while helping them achieve ambitious sustainable goals.

Q: How does your experience in other markets such as Uruguay, Chile or Brazil compare to Mexico?

A: The markets in these other countries are much more consolidated, developed and mature. Looking at other countries, we feel that Mexico needs to make more progress in this area. Potential customers still need to understand how the bilateral market works, and how they can have access and benefit from renewable sources of energy supply. For example, Industrial players have seen record prices at the auctions (i.e. US$20 / MWh) and it might be expected to have similar pricing for industrial off-takers, but the product sold at an auction (a solar curve) is not comparable to the product the customer is demanding.

Our industry needs to offer a more complete solution, with a combination of products. We are also moving toward solving this issue: We want to combine solar and wind. Our goal is to have an integral offer that satisfies the demands of the client.

Mexico has another great differentiator: it is a large country compared to Uruguay or Chile. In Brazil, another large country, medium size companies are quite large compared to other markets and consume a significant amount of energy. The same happens in Mexico with the added benefit that many of these companies tend to have long-standing reputation and credit worthiness. Our role is to support these companies and provide a product with an added value that will solve their energy needs in the long run.

Q: What is the financing landscape in Mexico given amendments to the regulatory framework?

A: At the moment, there is some concern related to understanding how the regulatory changes could affect certain parts of the industry. When investors or banks see these changes taking place, they usually see it as a possible long-term risk, but our projects are robust and are governed by the LIE regulations. They should not be affected negatively by certain announced changes, as it is the case with legacy projects. Still, there could be a spillover effect when a negative change in regulations occurs, but we remain confident that the enormous economic and environmental benefits of. Renewables alongside Mexico’s solar and wind recourses will make this industry prevail.

It is important to mention that solar projects in general in Mexico are practically new, having only been introduced on a large scale about four years ago and certainly there is still a lot to learn about this technology. This may not affect the financing aspect itself, but it prevents the optimal conditions for it to develop. Solar technology continues to evolve strongly, such as the emergence of bifacial modules. Luckily, our internal lab aids in providing the right elements to develop these ideas and serves as a reliable source to present new technology to financing institutions.

Q: What types of financing schemes do you consider when doing business in Mexico?

A: We have always worked with project-finance on a project by project case. We try to keep it simple and haven’t worked with portfolios. In Mexico, or most places except Chile, the option of development banks has always been available, either with international or local banks. In Brazil, you need local banks to deal with the currency, for instance. In Uruguay, we work with the International Development Bank (IDB) and with institutional investors, which was successful to the extent that we are trying to replicate that strategy in 2020 in Mexico. Here we have worked with local development banks such as Bancomext and it has been a very positive experience. Their large-scale involvement in the renewable energy market has been impressive. Commercial banks are willing to evaluate terms for longer tenors as well. When development banks are involved, it also provides more certainty to commercial banks.

Q: What is the company’s approach to alliances?

A: We are always open to evaluate new providers, in our business model we prefer to always look at each project with a different lens because we understand that each one is different and creating alliances might restrain us from doing what we do best: creating unique and tailor-made solutions that adapt to our clients’ needs. I think it is always good to have different options and negotiate in an optimal environment. One advantage that we have in this market is that we know our business very well. We know where we can optimize our operation. We also look at the experience a potential partner brings to the table. For instance, an EPC supplier might have a strong understanding of Mexico and the project’s requirements in Mexico but that might be different in other countries where they operate. We always look for a robust financial backbone with local experience and knowledge of key processes such as interconnection. Local know-how is particularly important, especially in Mexico.

Q: How does the company comply with its sustainability goals and local community communication?

A: It is our duty as a company to have a positive impact in the communities where we operate. We might at some sites be far from communities, while in others be very close but we always strive to act responsibly and create meaningful programs that bring common benefits to locals. To achieve this, we have a division called Environmental and Social Governance. It is based in Mexico and covers the entire region. The goal is not just to ensure that we apply local and international standards, but to raise the bar and go above and beyond to lift and empower these communities. One of our main focus, for instance, is on education and infrastructure. For example, we partnered with a local NGO to develop a pilot project in Mexico to provide education through the use of technology to over 400 students in a rural area, close to one of our projects. This was done with the main objective of closing the educational gap between rural and urban areas. The project was soon expanded to reach close to 2,000 students, whose schools were equipped with a digital classroom where they could all have access to an online educational platform and interact with digital aids. But we didn’t stop there, it was also important to attend certain needs that were identified, so we improved and repaired the schools’ existing infrastructure to provide better conditions to the students and teachers.

In Mexico, the social factor is of extreme importance due to its dense population which, compared to other countries where we operate, here is larger and unoccupied land is hard to come by. Another important factor to take into account is that people in remote areas have less access to education and is easy to find misconceptions or myths about new technologies in general in these communities. That’s why we give so much importance to education, it has certainly become an important and pivotal factor in our social approach and we also listen to the communities’ needs to make sure that we contribute in a meaningful way to their overall wellbeing.

We have also created strong alliances with local institutions like technological schools and universities to provide training and internships in our plants.

Atlas Renewable Energy develops, builds, finances, and operates clean energy projects in Latin America, with 1.7 GW of both operational and in-construction projects. It adheres to rigorous standards in the development, construction and operation of large PV projects.

Cas Biekmann Cas Biekmann Journalist and Industry Analyst