Claudio Rodriguez
Head of Mexico City Office and Partner
Thompson & Knight
/
View from the Top

Legal Feasibility as Key to Achieve Certainty

By Dalia Maria de León | Mon, 03/30/2020 - 19:24

Q: What are the main concerns that you hear from your clients and how do you address them?

A: Our clients’ main concerns are the changes in regulations, documents, agreements, preliminary drafts and draft resolutions at different legislative levels. These modifications are impacting how the Energy Reform functions because the modifications have an impact also on the legal regulations of the energy sector. Thompson and Knight's strategy is first to understand what is legal and what really is purely ideological because we have seen many documents that can be misinterpreted. A strong legal advice starts in dividing both aspects.

As such, the added value Thompson & Knight offers its clients lies in two elements: we perfectly know how projects operate and we have the ability to discern what is legal from what is ideological or dogmatic. This has helped us to design a strong dispute resolution strategy. We have also detected the need to resort to legal mechanisms to confront the government when the legal viability of some of its resolutions comes into question.

Q: What problems does Thomson & Knight solve?

A: Historically, we had focused on providing legal counsel around all stages of project development. This means supporting the development and creation of value in projects. But recently, we have focused our efforts on defensive strategic consulting. We have been quite successful in contentious matters. Part of this can be attributed to our networking efforts, which have helped greatly to have our work recognized by industry players and peers.

We have developed many projects throughout the value chain: financing, creation of PPAs and EPC and development. We are currently working on project development, such as the financing of a photovoltaic project and advising a transnational company on the implementation of its distributed generation businesses in Mexico. Last year, however, we implemented a significant change in plans to focus more on pre-procedural regulatory consulting.

Q: What message should the public sector give the private sector to ensure competitiveness in the Mexican energy market? 

A: It all starts with the concept of energy sovereignty, which apparently does not yet have a unified definition within the government itself. From my point of view, it is important to strengthen PEMEX and CFE but this should not exclude the private sector. Energy sovereignty does not ipso facto imply the exclusion of private investment, this is where the misinterpretation lies. The strategy for energy sovereignty should not be based on a mere dogmatic understanding. Energy sovereignty will be successful to the extent that the government understands the value of private investment. To think that the State can do everything without the support of the private sector would cause the final push for energy sovereignty to fail and fall. The government must establish a clear, definitive and unique position concerning energy policies in Mexico.

Q: What steps can be taken to increase legal certainty in the industry and continue to attract investments?

A: Once the government has defined a position that will help the private sector, it is essential to establish an operating basis. Similarly, CRE and CENACE must increase their efficiency because that is where the bottleneck exists. For example, when a customer wants to switch suppliers from CFE Básico to a qualified supplier, eventually he will have to contact CFE Distribución, but the approval for the connection of the load point could take a long time.

Q: What is required to ensure development of the renewable energy segment?

A: Due to the current economic landscape, many companies require greater value, experience and capital. For this reason, strategic alliances can be beneficial. It is essential to meet the need for better transmission lines. The government has absolute control of the networks on a regulatory level; however, they can enter into alliances with the private sector. This is ruled at Constitutional level. The future lies in both molecule and electricity storage, transmission lines, isolated supply and distributed generation. There will continue to be large-scale generation and despite the cancellation of public power auctions, many of my clients continue to develop projects. There are many clients that do not depend on the auctions, which were a great trigger for the renewable energy sector but at the end it is not the ultimate goal nor unique segment of the national electricity industry.

 

 

 

 

Dalia Maria de León Dalia Maria de León Journalist & Industry Analyst