Hugo Galindo
Director General
Grenergy Renovables

Looking for a Niche in Power Generation

Wed, 02/22/2017 - 14:51

Finding a niche within the newly liberalized Mexican energy market will be Spain-based Grenergy Renovables’ objective during 2017. The company, one of the winners of CENACE’s second power auction in 2016, plans to look at the opportunities for development in areas like private PPAs to cover the large energy necessities of Mexico’s industrial economy, says Hugo Galindo, the company’s Director General.

“We participated in the first and second tender and in the last one the company was awarded a 30MW project. Grenergy has more than 300MW in photovoltaic developments and more than 100MW in wind energy projects but we have to redefine our strategy to adapt the projects to the new conditions of the market,” the executive for the solar and wind power project developer says. The company, which specializes in developing, building and launching operations for power plants, with the objective of selling them to long-term operations, had close to 60 projects in different stages of development by mid-2016, of which around 18 were located in Mexico, according to their website.

Grenergy, Galindo says, “is currently working on 15 to 17 developments. We have 10 PV projects of 30MW each and a couple of smaller projects around 10MW each. With wind energy, we have some projects of 30MW.” The company, founded in Spain in 2007 at the height of the energy boom there, entered Latin America via Chile in 2011 and decided to follow up in Mexico in 2012-13 under the small producer scheme prior to the Reform. But it was able to adapt its projects to the new conditions set by the constitutional changes.

The company focuses on three stages of development, from the initial development, which can take from 12 to 36 months, to what it calls the R2B (Ready to Build) stage, following the period of construction and financial structuring to the last stage, operation. “Once the project is in the operating phase we are also involved during its first part, which means we operate them from between one to four years. Then we can sell the project to a final investor who is looking for a more fixed profitability and to avoid development or construction risks. There are investment funds devoted to infrastructure and renewables that are our eligible investors for this type of projects,” Galindo says. Grenergy’s business model, which allows the company to sell the project at any of those three stages, has given it access to larger profitability margins, he adds.


Galindo says that the advent of the Reform and the power auctions speeded the learning curve and increased quality for energy generation projects in the country and that the competitiveness achieved specifically in the solar PV sector has given a strong impulse to that particular technology. But size remains important in terms of cost, he adds. The project awarded to the company in the second auction “was among the smallest awarded, and unfortunately we see that the bigger the project, the better because they have fixed costs and 100MW projects are more profitable than 30MW projects.”

Financing is still difficult to obtain since the market is very new and both banks and investors are waiting for more information to become available. But Grenergy’s international experience helps. “In Chile we developed the first project to achieve financing from a local bank, which opened a door for us to look for opportunities with multinational and local banks. International banks like the ones from Germany and Spain are interested in these projects but they have to carefully go through each proposal to see the type of financing they can provide and settle the best conditions. Even though we have equity, if these projects do not have bank financing they are not feasible. As for Grenergy, once we have the PPA with CFE we will be able to negotiate with banks.”