Óscar Fernández López
LATAM Director General
Revergy
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Looking Back Helps Inform Plans for Tough Road Ahead

By Cas Biekmann | Tue, 10/26/2021 - 10:32

Q:  How much of a challenge has the year since March 2020 been for Revergy?

A: In terms of social issues and engagement, this period has been difficult. From a corporate perspective, most, if not all, contracts include clauses related to liabilities in case of emergencies like the pandemic and that has given us room to maneuver. As a service provider, we made it clear that our role was not to absorb a significant amount of the financial shock and corresponding burden that the pandemic represented. We are certainly not in the position to take on that burden when compared to much larger and more consolidated operating entities and conglomerates. This obviously generated tension among clients, suppliers and service providers. Until this question could be finalized, somebody had to absorb the losses, at least temporarily, to maintain operational continuity. These negotiations were not easy and sometimes became more antagonistic than expected. Thankfully, things have been resolved amicably.

The support that we have received from our headquarters in Spain has allowed us to be more positive in this regard. We have also been able to enact appropriate emergency protocols, as well as remote work processes. Procedures like these in Mexico have been significantly less formalized than they have been in European countries, so we have taken on the responsibility of being extra vigilant in our security procedures regarding our employees.

 

Q: How has Revergy adapted its services portfolio to this changing environment?

A: We certainly had to adapt to a significant decrease in demand, driven by the sector’s lack of stability. This has been in part due to the legal and regulatory policies implemented by this government, which have discouraged investment in renewable energy developments and projects. I would calculate that we have received around 70 to 80 percent fewer offers during this administration than the previous one. Construction in the renewables sector has experienced a brutal decrease, almost coming to a complete stop.

However, our forecasts for the country’s energy demand and the degree to which it will continue to grow up to 2024 have not really changed as a result of the pandemic. In terms of installed capacity, by 2024, Mexico will be short between 6 and 9GW of capacity to serve its needs. In other words, there will be significant issues in the years to come; nevertheless, the potential created for those who will solve those issues is still very much there. Meanwhile, Mexico has continued to produce and store fuel oil at an accelerated rate because fewer countries are buying this commodity, so more energy will be generated from the burning of fuel oil, which is a tremendously polluting activity. This policy is ultimately costing the country quite a great deal. Generating 1MW of wind energy costs US$20. Generating 1MW of solar power costs US$50. Generating 1MW of power through the burning of fuel oil costs around US$100.

 

Q: Last year, Revergy said it was trying to gain a foothold in solar O&M. How has this developed?

A: There have been positive developments on that front. Solar development has been somewhat shielded from the effects of the government’s many legislative initiatives, particularly the new labor laws, although we do not yet quite understand why this is the case. At the same time, we have been forced to find new business niches. We have lost close to 18 contracts and 100 workers while adapting to these new circumstances. The availability of preliminary investors, as well as sources of CAPEX and OPEX, has been dwindling for renewable projects but, of course, we do believe that the current and future energy transition will be on our side.

Revergy specializes in engineering related to renewable energy projects, particularly in wind and solar. It is active in every stage of development, from inspection to assembly and O&M, of which it has 800MW under management in Mexico alone. 

Cas Biekmann Cas Biekmann Journalist and Industry Analyst