Legal Expertise Breaks Local, International Barriers
Q: You were involved in the Energía del Caribe project. What made it unique and how do you face the challenges?
A: There are several reasons but the first is that it involves three different jurisdictions. The natural gas supply comes from the US, the power generation facility – a combined cycle power plant – is located in Monterrey and the electricity is exported to Guatemala. Even though it might look odd to have a plant in Monterrey to export to Guatemala, the fact is that the location is for strategical reasons: it is located near Monterrey’s main highways, is close to the airport and has access to several transmission lines and a substation. More importantly, it is located near one of the largest and most competitive natural gas producers in the world. These characteristics forced a series of technical adjustments to the project and the need to obtain several permits from the authorities to operate. In Mexico, it required an interconnection agreement that did not exist at the time. But because the project was developed under the Independent Power Producer (IPP) scheme, it had no legal constraints to generate and export electricity and we finally managed to obtain the required permits and agreements. Our experience and in-depth knowledge about this sector were crucial in this case and are two of the reasons why Energía del Caribe chose us as their legal firm.
We expect that the open market introduced by the Energy Reform will increase business opportunities for these kinds of projects. The fact that authorities are now permitting the participation of national and international capital will likely allow more cross-border cooperation.
Q: How important is the electricity sector in your portfolio of clients?
A: Our firm focuses on the development of infrastructure projects for the energy sector, which means that we work daily with projects related to the oil and gas and electricity industries. Around 50 percent of the projects we take are related to electricity. Our firm has three divisions: regulatory, contracts and land acquisition and rights of way. We offer turnkey projects, which means we help our clients develop business plans, navigate regulatory constraints and support contract negotiations. If needed, we also deal with land acquisition for duct-laying projects and all litigation regarding the energy sector. We are 45 professionals, including lawyers, engineers and economists, which allows us to have the global vision and holistic understanding to carry out energy projects successfully.
Q: What is the typical issue you deal with and how does your expertise make a difference in these cases?
A: We are mostly helping our clients with the procedures needed to become a participant in the Wholesale Electricity Market (MEM). Many companies believe that registering and requesting the necessary permits from CRE is all it takes. But it is not that simple. The entire procedure is complex and requires the advice of legal experts. To obtain the permits, companies need to work hand in hand with CENACE and demonstrate compliance with requirements and infrastructure specifications.
At Rodríguez Dávalos Abogados, we accompany our clients throughout the entire process, helping them with other aspects as well, such as business plan development. We also provide consulting services as well as legal and technical assistance to carry out CENACE’s processes regarding contracts and permits. It is important for us that our clients understand what they are agreeing to when signing these contracts, what would be their responsibilities and obligations and the guarantees that might be required. It is all about helping them understand the role they are going to play in this new market.
Mexico still needs to clarify more information about the electricity market. But we expect the operational rules to be adjusted over time to better suit the needs of the country and market participants. The government is doing its part to increase the industry’s knowledge by providing seminars and courses, which will be beneficial to the market’s improvement.