Andre Von Frantzius
Commercial Director
Grupo DESMEX
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View from the Top

Group Relishes Energy Challenge, Eyes More

Wed, 02/21/2018 - 11:29

Q: How is Grupo DESMEX working to strengthen its position in Mexico’s energy market?

A: Four years ago, Grupo DESMEX started working on a circular business structure that was designed to cover all our business units. This concept started when we bought Solarnova, a German manufacturer of solar PV panels with over 25 years of experience in the European market and a capacity to produce 80MW per year. Becoming full shareholders of the brand, we acquired the capacity to directly produce solar panels for the market segments in which we are present, from residential to industrial. This reinforced our already strong presence in those markets with over 428 products and 52 solutions for interconnected and isolated energy systems, illumination integration, desalination and recycling, to mention a few. Grupo DESMEX is also an exclusive supplier of many brands that are leaders in other countries. To provide the Mexican market with these brands we have worked hard to develop strategic partnerships. 

After buying Solarnova and introducing more products to our portfolio, we changed our business model into a franchise scheme, recognizing that our nine offices were not enough to manage all our products and the markets in which we were present, nor to provide the full coverage to the Mexican market that we wanted. In 2016, we incorporated EPC services into our portfolio along with our own financial leasing branch, allowing us to offer an extra added value to our clients. These last services are for installations where traditional solutions such as third-party integrators and banking institutions do not fit clients’ needs. Finally, and to close the circle, we are starting to work in the energy generation area. 

In April 2017, Grupo DESMEX bought a legacy permit for a 30MW project in Chihuahua that is expected to be operational by December 2018. This legacy permit will be used for our energy sales division. We have several investors on board who are constantly looking for ways to add more solutions and increase our added value. With this circular structure in place, we expect to become a clean-energy conglomerate in Mexico in 10-15 years.

Q: What is the main added value Grupo DESMEX provides that will allow it to become an energy conglomerate?

A: Our main added value is our broad experience of over 10 years in the energy market and 21 years working in Mexico. We are one of the strongest players in distributed generation, with over 7,200 distributed generation installations performed by our branches in both the residential and commercial sectors for an accumulated installed capacity of 54MW. This success has not come easily; it is the result of hard work and advancing step by step with a clear goal in mind. Our commitment to the market is reflected not only in our first foray into the energy-generation market, with a 3MW project, but also in our follow-up 30MW project. 

Grupo DESMEX has a strong engineering team with over 175 people that allows it to enter the engineering and installation segments for energy projects. For projects under 250kW we let our franchises manage everything. Because we train and certify them, the final customer can be assured that the project will be carried out to the highest quality standards.

The group is also analyzing the possibility of building a manufacturing plant in Mexico. In the upcoming months, we will make the decision of whether to build a 40-60MW capacity facility in Guanajuato. This production capacity will be used to nurture all our distribution channels. This project is feasible not only because of the already strong presence we have in Mexico, but also because of the strong expertise we have from Solarnova, whose panels are of the highest quality. 

As a matter of fact, an installation done in 1989 in Veracruz with Solarnova panels continues to offer 85 percent of its initial performance, which is a major achievement. Our strategy is clearly outlined and executed with an eye to offering the greatest benefit to our customers in the future.

Q: Is Grupo DESMEX looking to participate in the longterm electricity auctions?

A: Although the electricity auctions have garnered international attention, we all recognize that there are also flaws in the process, such as very low prices and a dangerous uncertainty. Most of these risks are coming from project developers not knowing where their interconnection point is. Interconnection has become one of the biggest problems in Mexico not only for the auction projects but for the whole industry. Before deciding on the full 30MW project we decided to go for a 3MW pilot  on which we work as the full EPC and O&M provider. 

The interconnection with CENACE has been a painful process to go through. We are one year behind schedule because of interconnection issues, which translates to a full year in which we have to pay the bank both capital and interest without having any income from energy sales. Interconnection has been and still is one of the biggest problems for project developers. 
The main problem in this area is the lack of communication between CRE, CENACE and CFE. It has not been an easy road. The Energy Reform is moving, but it has been slower than we expected, and for it to be successful all institutions have to work hard to create a proper communication channel that works for the benefit of the whole industry.

We are not yet looking at the auctions. Grupo DESMEX is aware that it will not become the most important energy provider in Mexico; there are groups coming to the country that have been working in that area for over 100 years and are already strong energy conglomerates capable of winning a project or an auction just to strengthen its market presence. It would be almost impossible to win in a one-on-one fight against them. 

Grupo DESMEX wants to keep working in the targeted market niches that have worked very well for it, which are residential, commercial and industrial. In those markets, we want to double our presence annually, meaning that if 2018 is the year we complete the 30MW project, in 2019 we will work on a 60MW project and by 2020 reach 100-120MW.