Mannti Cummins
Director General
Energía Veleta
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View from the Top

Navigating Complex Agrarian and Real Estate Laws

Wed, 02/24/2016 - 12:56

Q: How have Energía Veleta’s unique origins and business model helped it stand out from the crowd?

A: The company traces its roots to the US energy industry, particularly the oil and gas sector based in South Texas. American Shoreline developed a successful business model in the oil and gas sector that was adapted to the wind sector. Our core skill has been our open and transparent style of negotiation for land contracting with local land owners. In Mexico, Energía Veleta has four project zones with a potential installed capacity of 1,000MW. We have leased over 110,000 hectares in four separate areas. We search for regions and locations that have been overlooked by other developers and have set our sights on the north of Mexico.

Q: How important is the collaboration with the Secretariats of Economic Development of the respective states in furthering your projects and vision?

A: The level of collaboration with the government entails a process of education and promotion of clean energies. The initial contact with the state government begins with the Secretariat of Economic Development and, once it sees the potential, it is very supportive. There is an interaction between the state and federal governments, and the land use agreement must go through federal agencies like SEDATU. The cooperation between national governments is also noteworthy, for instance the Tres Mesas project in Tamaulipas is being financed by the NADB, a binational bank straddling Mexico and US. The board of directors is comprised of the US Secretary of State, and Ministry of Treasury and its Mexican counterparts, among others. The Overseas Private Investment Corporation (OPIC), an agency of the US Government, is also providing debt financing to the Tres Mesas project.

Q: How does the application of the Law of Electricity Industry, especially Chapter Eight, impact the leasing process?

A: When developing projects, there are a series of laws that the company must navigate, like the agrarian laws of 1992 that permit the legality of ejido leasing and prescribes a process of notice for development and contract approval. Additionally, there are 19 different clauses in Chapter Eight of the Law of the Electricity Industry dealing with the occupation and use of land surface, which is creating an additional burden for developers. The developer must provide a written proposal to the landowner among other disclosure requirements. In this chapter of the law, new responsibilities and roles have been given to a variety of governmental agencies making them active participants in the land negotiation process. The changes in land acquisition process have not impacted our ambitions. We have signed an additional 10,000 hectares in 2015 and we are in the process of negotiating another 36,000 hectares. We are looking to partner up with other companies to develop new projects and we have identified two new locations. During the land acquisition process, it is important to make a distinction between private landowners and ejido lands. Private lands were expropriated during the creation of ejidos so large private owners divided their lands among family members in order to minimize expropriation risk. Today, these landowners are the third or second generation after that property title division. Many family groups have conflicting goals and ideas on how the land should operate, so we have to navigate these differences. By involving the communities in the development process it could help resolve social issues,

Q: In your eyes, are the agencies ready to take on their new responsibilities and how will this ultimately impact the development of renewable energy projects?

A: In the past, you would go to the notary, property and agrarian registry, now before you begin negotiating with the landowner you need to send notice to SEDATU. Currently, SEDATU is not prepared to actively carry out the responsibilities entailed in this process. The economic proposal given to the landowner must include land value tables. INDAABIN is the agency in charge of publishing these reference tables, yet they currently do not exist. After signing an agrarian contract, an Agrarian Tribunal is necessary to obtain a judicial decision, and in order to check that all provisions of Chapter Eight are followed. If it is a private contract, you must go to the District Court. Many developers do not know how the District and Agrarian courts work and, due to the peculiarities of a wind energy lease, it is likely the Courts are unaware of how they are structured. There are many questions that are left unanswered regarding the efficient and smooth application of the law.