Flexible Solutions Through a Diversified PortfolioWed, 02/24/2016 - 09:39
Having a strong name in a specific segment definitely boosts a company’s reputation, but having a diversified portfolio and making a name across the entire industry is good for business. Thermion, a private equity firm focused on the power sector in Mexico, is currently building a diversified IPP platform using both renewables and natural gas-fired generation facilities. Since the start of 2013, the company has been developing approximately 15 projects and is negotiating the acquisition of a few more. Thermion focuses on a combination of proven power generation technologies, such as wind, solar PV, landfill gas-to-energy, and combined cycle power plants.
“Our energy mix is geared toward renewable power generation and is complemented by the combined cycle plants. We believe this provides us with a strong customer value proposition, as we are able to offer power in practically any electricity tariff segment,” explains the company’s CEO, René Maingot. Thermion’s mix is currently comprised of 67% wind, 22% solar, 10% combined cycle, and 1% landfill gas-to-energy. Nonetheless, its mix is not static; it evolves with opportunities. “With time, the natural gas component might grow to a larger percentage, but our focus will always be biased towards renewables. We anticipate that as solar energy becomes increasingly competitive, it should also comprise a larger segment of our mix.” Maingot says Thermion’s energy blend resembles that of many leading global utility companies and independent power producers, meaning a combination of renewables and natural gas-fired facilities
New power projects require that their owners ensure they can produce at least 90% of the production contracted for the next 15-20 years before building the facility. Therefore, Maingot finds solar energy and landfill gas-to-energy projects to be speedy solutions because of their small size and rapid deployment. The company’s wind farms are sizeable, most of them with capacities ranging from 100-250MW. “The benefit of renewables is that the energy prices are incorporated into the contract from day one and there is no volatility of the electricity price, so customers know what they will be paying every year and they can plan with an increased level of certainty,” Maingot asserts.
Thermion’s goal is to build a strong and profitable cashgenerating platform for its investors, for which it aims to invest close to US$17 billion in debt and equity in Mexico over the coming years. “The investment opportunity in Mexico is significant, as the country requires approximately US$154 billion in electricity infrastructure, US$78 billion in power generation, US$45 billion in transmission and distribution, $16 billion in maintenance, and another US$15 billion in gas pipelines,” says Maingot. In terms of energy sales, almost all will be supplied to companies in the private sector based on traditional PPAs, although in some cases Thermion will also sign long-term contracts with city and state governments, as well as public institutions, including CFE.
Maingot claims his company’s approach is to provide practical and value-enhancing customer solutions. “It is easy to get caught up in technology, when the real focus for us is the customer.” Thermion’s ideal client base consist of customers with an annual consumption of 30-40GW; nonetheless, the company is flexible when it comes to working with clients with lower energy needs. For Maingot, the aim is to win customers, not to discard them. Some aspects he looks at when selecting clients and projects include credit quality, tariff ranges, and growth rates. Most clients like the idea of a mix, as they feel more comfortable with several plants delivering energy to their operations, as opposed to just one. “In practice, there is not much of a difference, given that most clients will not notice which source their energy comes from. What they will certainly notice is the value of the electricity bill and whether they are paying less than before or not. Regardless, we show them pictures of the plants and sometimes invite them to visit the sites,” Maingot explains. This approach allows Thermion to tailor the energy supply solutions to its customers’ needs rather than impose a solution on them. “Customers like this aspect and see it as an integral part of our value proposition,” he boasts, adding that companies are unlikely to sign a PPA in Mexico just for the sake of becoming green, so there always has to be an attractive savings component involved. Depending on the electricity source, the savings Thermion offers could be anywhere between 7-20%.