Experience, Bankability, SatisfactionMon, 02/25/2019 - 16:21
Q: What are the main market segments in which ADM is looking to develop operations in Mexico?
A: Mexico is going through an exemplary transformation caused by the market’s opening. This represents a huge opportunity for medium-sized companies with easy access to financing, like ADM. We see ourselves participating in two different value chain segments: project developing and EPC construction. As an investor, we participated in the first long-term electricity auction with the adjudication of a 60MW wind farm in Yucatán. We are developing new projects in other regions of the country and our goal is to either place them in the market through bilateral PPAs or to propose them for upcoming long-term electricity auction bids. Even though our core EPC business is construction services, we have finance and concession divisions as well. Investing in electricity and renewable energy generation is very attractive to us. But it is also important to maintain our core business, as we have contracted 1GW through construction, design and purchase of several projects. We have already concluded some projects while others are in development or getting started. As an EPC company, we are the second step in the value chain after financing is put in place.
Q: What are the three main capabilities that differentiate ADM from other companies in the sector?
A: Our three main capabilities are: experience, bankability and client satisfaction. ADM is a Mexican company since 2007. Before our arrival, we developed several projects of considerable installed capacity in other countries. We started in Spain when it liberalized its electricity market and years after we pioneered wind installations in Poland and Norway. Regarding bankability, ADM follows a conservative financial policy. We attained financial health by taking special care of our debt capacity and margins.
Regarding bankability, banks apply due diligence to market participants to assure that they comply with all requirements and are bankable. We pass all these processes, which represents an important advantage for our clients. Finally, our client service vocation commits us to finishing construction according to the determined time frames. The construction process represents a short percentage of the time that takes to complete a project’s total financial business model. At this stage, risk perception is high so if you meet deadlines the result is beneficial for the developer.
Q: How would you rate the energy market in Mexico?
A: As one of the winners at the first long-term electricity auction, we consider ourselves pioneers of the market opening process. I have personally experienced these kinds of transformations with ADM in Spain, Poland, countries that also faced regulatory modifications. When the financing model of infrastructure projects changes, the inertia of the market and its systems force a resistance. Stakeholders and participants must come to understand their new role, as well as investors, public administrators and social agents. From our point of view, the Mexican government and CFE are doing an excellent job. The Energy Reform shaped an environment of clarity applied in a record short period. The resistance caused by market inertia is now at normal levels due to the job achieved by all these entities.
Q: What is ADM’s experience with renewable energy generation?
A: We have ventured into solar and wind technologies. At the moment, we are developing and financing our own renewable projects. We have settled the requirements regarding land ownership, environmental and social permits and our plan is to start construction at the beginning of 2019. Additionally, Mexico’s solar sector is becoming attractive as a result of the rentability and high level of competitiveness in terms of technologies. ADM is seeking an opportunity to participate as a developer in this sector. As an EPC, we already have developed some solar parks in Mexico. By adding our installed capacity as a constructor and developer, ADM has developed 1,100MW in the solar sector. Mexico is rich in solar and wind resources throughout the country that may lead to an interesting energy mix.