Francisco Avelar
Financial Director
Grupo Bimbo
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View from the Top

Food Industry Relies on Wind Power

Wed, 02/19/2014 - 12:49

Q: What discussions took place inside Grupo Bimbo before going ahead with the Piedra Larga wind farm?

A: Feasible projects need to be financially viable, socially responsible and environmentally sound. We first received proposals for various potential projects in 2004, but at the time it was not possible to submit all the needed paperwork because of the operating framework. In 2006, the government approved certain rules that allowed wind farms to become a real possibility. After this, we started to go deeper into the technical, financial, social and environmental aspects until the project covered all of them, just as the word sustainability implies, and it was not difficult to get the project approved because it became a perfectly sustainable project.

Q: Why did you choose to cooperate with Renovalia in order to make Piedra Larga a reality, and what made the project different from others?

A: We felt more comfortable with Renovalia because they offered greater clarity and a more competitive contract; they offered the best financial option, too. Even if it might look like a smaller company, Renovalia has proven its expertise in Mexico. In building our wind farm Renovalia experienced some social issues in Oaxaca, but they reacted as well as possible. We feel that we have the best partner available.

Q: What approach was taken to solve these social issues in a way that aligned the interests of the developer and the community?

A: The region of Union Hidalgo in Oaxaca is a region with many social issues. Renovalia spent a lot of time explaining the meaning of the project and its benefits to the community, in both Spanish and Zapoteco. Renovalia had worked there before and already gone through a learning process about the needs of the community. Grupo Bimbo did not experience problems with the community thanks to Renovalia’s involvement, and we signed a Power Purchase Agreement for 18 years.

Q: How does this project impact your financial bottom line, since many people think that wind power is very expensive?

A: In the first seven months of operation, the wind farm’s performance was in line with our projections. Inflation has been increasing but electricity prices have increased, too. We participated in this project because in the past electricity tariffs were increasing twice as fast as inflation and we felt comfortable with that. Nevertheless, we do not know what will happen in the future, but during these seven months we have saved the money that we were expecting to save.

Q: What were the critical success factors that allowed Grupo Bimbo to change from food and bakery to energy and engineering for the wind farm?

A: Our company did not participate with an actual investment because that is Renovalia’s area of expertise - we focus on our business, which is baking, not building wind farms. This separation of responsibilities may have been one of the most critical success factors of this project, as it left the technical issues to the experts. Mexico has established many different tariffs depending on the consumption of energy and our corporate energy department has developed an in-depth understanding of the way we use power. Grupo Bimbo pays the HM tariff, which is divided into three different timeframes during the day: base, intermediate and peak. By understanding the group’s consumption profile we can compare that with the power that is being generated by the wind farm. We are now validating the assumptions that we had made about the power generation expected from the project.

Q: What advice would you give to other off-takers who might be interested in self-supply energy projects?

A: It is important to analyze your current situation, create a team of experts, either internal or external, and lawyers. It is very difficult for companies to find professionals to work on these types of projects and few companies are as big as Grupo Bimbo. It is possible to band together with a number of companies to gather financial strength and become joint off-takers. At first, we considered 90MW for the wind farm, but our estimations were not accurate and this would have been too much power generation capacity for the goals that Grupo Bimbo was looking to achieve. Therefore we invited our strategic partners, under the umbrella of Amigos de Bimbo, to the project, who now consume 18% of the power generated by the wind farm.