Electricity Sector Opens Doors to InvestorsWed, 02/24/2016 - 13:50
Q: How do the core activities of Baker Tilly’s Energy Desk help its clients successfully develop projects?
KS: The Energy Desk can be thought of as a business developer. We have a highly diversified client portfolio, as we work with experienced industry players and newcomers alike. These people put their money in our hands and ask us how to move their money in order to create a business. The Energy Desk can also help customers who are looking to enter a tender by assisting them with all the necessary documentation and steps, as we have the diversified professionals needed to accomplish this. Our highly interdisciplinary team has outstanding strengths in finance, engineering, and project management. The idea is to be able to develop an entire project from scratch until all agreements are closed with the EPC companies, which entails fiscal, accounting, and legal consulting services. In addition to staff members with experience in lobbying, we also refer to external professionals according to a project’s requirements.
Q: How can the integrated services you provide help ease the challenges that arise in the development of energy projects?
RA: The fact that our team consists of experts in financing, law, and fiscal matters enables us to advise firms in a way that helps them streamline registrations, contracting procedures, credit approvals, and access to financing for their projects. Since the Energy Desk helps clients design their projects from their conception until the final stages, we seek the support of engineering firms to provide turnkey solutions. We are also present in the public sector, where we advise government organizations in areas such as public accounting or tax collection.
Q: What are your clients’ most common questions and concerns regarding the energy sector?
KS: The first thing worth pointing out is that the electricity sector is drawing our clients’ attention more than oil and gas because the latter is being seen as an overcrowded, slower, and more complicated area. Opportunities in oil and gas are limited because reservoirs must be identified and then companies have to begin exploration drilling activities. Oil and gas is a less inclusive market due to the technology it demands in areas such as deepwater fields.
Q: In your eyes, why is the electricity sector the truly revolutionary element of the Reform and where are the areas of opportunity for newcomers?
KS: The Energy Reform’s focus on the oil and gas sector might have created the most hype, but for me, the truly revolutionary element of the Reform is the one related to electricity, which pushes the development of renewables, facilitates the entrance of investors, and creates a level playing field. I have noticed a particular concern regarding the way clean energy certificates will work. Regardless, companies are under the impression that the electricity sector can be more profitable than oil and gas. Investors are aware that now is the right time to jump on board, and those who do not have previous experience in energy are looking at electricity, mainly clean energy sources.
RA: Investment levels required in the electricity sector are lower, thus more investors are attracted. The Energy Reform represents the beginning of a necessary change that was not carried out quickly enough. The Mexican oil and gas industry has been characterized by the State’s historical dependence on oil revenues and PEMEX’s lack of resources for future investment. Deepwater was never an option until Cantarell started declining. The great contribution of the Energy Reform is its power to enable investment in alternative energy sources, because this is an area that will see plenty of activity, job creation, and competitiveness; this is where Mexico is aligning with the rest of the world.
Q: Which other sectors are the low-hanging fruits for investors and how should they seize the opportunities?
RA: If we were to advise investors on where to allocate their money in Mexico’s energy sector, I would suggest natural gas pipelines, cogeneration plants, and similar projects. Mexico is lacking when it comes to infrastructure for natural gas transportation, which is much needed now that the country will increase imports from the US. This situation creates plenty of opportunities for investments and project development. We are keen on mini-cogeneration because it is an effective starting point for obtaining cheaper energy, and renewables are a promising sector. We are excited about the development of these projects, and we currently have a client who is looking to build a 100MW solar photovoltaic park.