Galt: Pivoting to Survive and SurpassBy Cas Biekmann | Mon, 10/11/2021 - 12:39
Q: How has Galt’s portfolio evolved during an uncommon year for the Mexican market?
A: During the COVID-19 pandemic, the number of corporate clients that have become more environmentally conscious and are now looking at renewables as a way to reduce their carbon footprint has grown. This phenomenon is not unique to Mexico; this is observable in the global energy market, and most easily discernible in ESG investments.
Because Mexico’s energy market is characterized by volatility, red tape and bureaucracy, large corporations are increasingly seeing distributed solar as the only viable and market-safe option for them to cut carbon emissions. This realization has allowed us to quote over 10 times more projects than we have had in previous years, especially in C&l solar. In 2020, we had the highest deployment of financial projects, cranking out what we had estimated for 18 months in six months’ time.
However, every time there is a COVID-19 wave, companies backslide into a conservative mode of operations and this has delayed various projects. Moreover, the confluence of these two issues has been further exacerbated by certain media actors who have attempted to frame the federal administration as anti-renewables, which is not the case. Therefore, although there is incredible interest and demand, the market environment has made long-term commitments difficult. Even with these difficulties, we have seen our financing arm grow to represent over 70 percent of our sales in the past 18 months, compared to 30 percent in the years prior. This has pushed our cash sales from 50-60 percent to 20-30 percent, with a 70-80 percent financing.
Q: There has been a recent uptick in people looking to invest in green financing. Has Galt Energy found it easier to attract funds necessary to deploy more projects?
A: Historically, we relied on national funding but due to the volatility the peso has experienced in the last eight years, these funds have dried up. The limited amount that exists is being funneled to very safe alternatives, triple-A companies and projects with very high returns. On top of this, we have seen lenders raise their threshold on expected returns based on the scarcity of available capital within the market, which has forced us to look elsewhere. Thankfully, the global energy transition has generated a great deal of disposable capital, mainly from the US.
In contrast to Mexico, the US has a nexus of significantly cheaper capital that investors want to deploy and at low-risk-adjusted returns. The benefits are clear and we are now working on transitioning into US-based funding.
Q: How have you adapted your solutions to unfamiliar industries?
A: The COVID-19 pandemic has forced us to expand our targeting into different industries. These were selected based on how they were impacted and how they performed during the pandemic. Although solar can be used as a defense mechanism by improving a company’s bottom line with savings between 20 and 30 percent with our PPA, we have noticed that companies tend to employ more projects during market demand peaks when they feel most financially confident. For example, we have done several projects for cardboard manufacturing factories that experienced a boom driven by the sudden upswing in e-commerce. We have also worked with companies in the steel industry that have fared well during the pandemic due to high steel prices. This is in contrast to the few projects we have completed for a few hospitals and hotels that have been severely impacted by the pandemic and stand to benefit the most from reducing running costs. Based on this observation, we have concentrated our efforts on high performing industries and it has definitely played in our favor.
Q: Galt Energy uses Sun Power solar panels and Generac storage batteries. Why do you think these two technologies provide the most stable energy generation?
A: We have been working with Sun Power for over five years as an exclusive dealer, a decision based on experience and a desire to generate a more stable market. This has allowed us to evade unpleasant surprises like restructuring, bankruptcy or human rights violations, which have occurred most recently in China. Ultimately, aside from receiving a guaranteed high-quality product, by working with US manufactures you save yourself many headaches down the road.
Generac, considered one of the larger, more experienced generator manufacturers, has been able to secure the necessary suppliers to fulfill orders on time for their new battery products. This is important given that the market has been continuously marked by incessant demand and a significant supply deficit. Every time demand seems to be tapering off or finding equilibrium, there seems to be a sudden upsurge. Most recently, it was the California fires that completely overwhelmed the market. Within this context, you can understand why we had not been able to enter the market despite understanding its salient importance.
Galt Energy initiated operations in 2013. It is a Monterrey-based company that specializes in the installation of custom-made solar PV panel systems for Mexico’s residential and C&I markets.