Ricardo Cardiel
CEO and General Manager of Latin American
Rainmakers
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View from the Top

How to Make Prosperity Rain Down on Renewable Energy Projects

Wed, 02/21/2018 - 16:08

Q: Why did Latin American Rainmakers decide to integrate a business line in renewable energy?

A: Latin American Rainmakers’ core business is business development. Our 20 years’ experience in the electric sector made renewable energy the logical next step for growing our business. We consolidated our added value by integrating five must-haves in the electric sector and applied them to renewable energy. First, a firm grasp of the industry’s regulatory framework, primarily regarding the environmental and social implications of renewable energy projects, as well as their overall viability. Second, financing. Project financing is the most important aspect in project development because it is the backbone of any project. Bad financial planning can bury a project even in its early stages and Mexico still has a long way to go in developing standardized financial planning, addressed and adapted to renewable energy. Third, technology. By using the discounted cash flow (DCF) method, we can select the technology that is best suited for a project, not necessarily because it is the latest or the most expensive but because it generates the highest ROI. Fourth, integration. Our company realized early in the game that both the electric and renewable energy industries require EPC solutions and consequently incorporated them into our business portfolio. Last, but definitely not least, commercial strategy. All the previous elements are rendered useless if you do not have a landed PPA to sell the project and ensure its different phases. 

Q: What key factors determined the company’s interest in bio-digestion and biogas?

A: Biogas is a tremendous opportunity in Mexico. Not only because it is a rather unexplored technology but also the satisfaction provided by the inherent social elements. Biogas deals effectively and decisively both with mitigating CO2 emissions and the country’s waste management. According to the Ministry of Environment and Natural Resources Mexico generates 102,895T of urban solid waste every day. Out of 100 percent, 83.93 percent is collected, of which 78.54 percent is allocated to landfills and of that, only 9.63 percent is recycled. In contrast, countries such as Switzerland, Holland, Germany, Belgium, Sweden, Austria and Denmark, to name a few, only allocate 5 percent of their solid waste to landfills. In particular, both the food and livestock sectors could greatly benefit from this technology.

Q: Could you elaborate on your large-scale methane gas project?

A: We developed this project at Mexico’s northern border, using 200T of waste produced daily to generate biogas. We chose this region because the notion and practice of waste management is more developed, compared to the rest of the country. We did some trials with different volumes of waste to determine the optimal dimension for the biogas plant given the waste intake. There is a prevalent misconception that more waste equals more electricity production but the process is more sophisticated than that. 

Q: What is the comparative advantage of your company?

A: We optimize businesses through a meticulously analyzed sense of reality whereas our philosophy correlates with our 20 years of experience in helping our clients’ business prosper. Our centerpiece is our profit and loss/DCF model that enables us to offer the best option for our clients throughout the entire value chain of the project. To sum up, we focus on minimizing the time for a project financial closing.

Q: What is your targeted portfolio?

A: We are elated to see that the industry has changed at its core. In the past, only top-tier off-takers with solid financial statements and multimillion-dollar revenues could undertake electric power-related projects for self-supply. Now, thanks to the recent developments in the market and the Energy Reform, SMEs can undertake self-supply and distributed generation projects. Developers, equity partners, distributed generation partners, as well as the residential-commercial segment of the electric market are within our targeted business scope too.

Q: How would you rate the design of Mexico’s Energy Reform?

A: We think that Mexico’s Energy Reform prioritized the oil and gas sector. Then, it slowed the pace in which the reform addressed the electric and renewable energy sectors. This slowdown worsened due to the fact that the macro and micro economic landscape was entering a turbulent period when the reform was launched. For instance, interest rates, warranties and the exchange rate between the US dollar and the Mexican peso played a key role in putting on hold most of the projects that were under development. Also, we have yet to permeate concepts like project financing and particularly financial closing for renewable energy projects. The new legal framework, infrastructure programs, such as PRODESEN, and public instruments like energy auctions have only recently impacted the sector, creating new opportunities for our company. In the long term, Mexico´s Energy Reform will definitely be a great success, bringing prosperity for every stakeholder involved in the energy ecosystem.

Q: Which renewable energy resource has the most promising future in Mexico?

A: Mexico is blessed to have many renewable energy resources across the country. We have been looking at hydro power for a long time because it has interesting applications for electric-power generation. Some extrinsic factors surrounding this technology, particularly social and environmental impact, have pushed us to look at other renewable-energy sources. The country’s potential in geothermal energy is remarkable but requires high capitalization and its harnessing and power-producing applications are highly specialized and technical. We have been dealing with the electricity market for 20 years so we can attest to the tremendous drop in solar-energy costs, making it increasingly attractive and commercially viable. The economies of scale and efficiency in power production from this particular technology are notable. Wind power also has tremendous potential but the time required to develop a project is a key condition that needs to be considered. 

Q: What are your future ambitions in Mexico’s energy sector?

A: We want to keep supporting Mexico’s electric sector and to grow in sync with our clients’ business. Our differentiator since our inception is our capacity to evolve parallel to the market’s tendencies. To summarize: we want to keep evolving and stay at the forefront of new opportunities; we also want to be the country’s reference in energy business development