David Flores
Managing Director
Ormazabal Mexico
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Insight

The Promised Land for Energy Companies

Wed, 02/22/2017 - 15:28

The strength of Spanish companies in Mexico’s power sector is undeniable. Spanish expertise can be found along the entire power value chain, including power generation, transmission, project development and specialized consultancy services. For some of these companies, launching operations in Mexico has been the start of a fruitful business driven by growing demand and abundant energy resources. This was at least the case for Ormazabal, a company that designs, manufactures and provides solutions for electricity transmission and distribution.

“Ormazabal Mexico, which opened a local office in 2012, has been the group’s fastest-growing affiliate worldwide. We have increased our turnover five times since we arrived and we still expect to grow further. In 2015 we contributed with around 15 percent of the group’s total revenue in Mexico. The Mexican market presents challenges as in any other country but we are optimistic about our future here,” says David Flores, Managing Director of Ormazabal Mexico.

“Mexico offers a great environment to develop new ideas, to establish synergies between different business units and to innovate. Mexico has given us the opportunity to create projects in areas beyond our typical reach, such as a solar park in Acapulco when we had little experience in project construction. Mexico is an interesting field to try new things, allowing us to move outside the manufacturing bubble,” he adds.

Renewable energies, construction, infrastructure and transportation are the strongest market segments for Ormazabal Mexico. CFE used to be the company’s top customer but the slowdown in the number of projects developed by the state-owned company as a result of the Energy Reform drove the company to diversify its portfolio, which was crucial for navigating the transition. Now, however, there might be new opportunities for Ormazabal to collaborate with CFE to improve the power network. “We have identified two major areas of opportunity to collaborate with CFE. The first one is substations, an area in which CFE is investing heavily despite its general investment reduction. The second and most attractive area is power distribution, including equipment to detect technical and nontechnical losses and improve supply continuity. We have proven experience in this area as we have worked on major projects with large-scale utilities such as Iberdrola, Vattenfall and EDF. CFE has suffered million-dollar losses related to technical and nontechnical elements, so there is a real need to correct the problem. The solution to this goes beyond installing new meters and we have the skills and capabilities to help CFE in this matter,” he says.

In the renewable energy arena, wind energy projects stand out as an interesting segment for Ormazabal. “We hope the next three to four years are highly promising as we perceive strong stability in the wind market. The industry has become less dependent on Oaxaca in the past few years and is in the process of developing wind farms all over the country. The first power auction was not as favorable as expected for wind energy developers but they achieved better results in the second event.”

The company also sees potential in the solar energy market after the outstanding results for solar projects in the first two auctions. In both segments Flores sees an attractive market niche for its Gas-insulated Switchgear (GIS) technologies. “Together with ABB, Schneider Electric and Siemens, we are the top manufacturers of GIS panels. This product enjoys great demand in Mexico, being present in around 90 percent of the wind farms installed in the country and 80 percent of the solar parks. GIS panels are also present in around 65 percent of CFE’s new substations and this is expected to grow. In the industrial segment GIS panels enjoy a 55 percent market share, mostly in hotels and transportation,” he says. To maintain growth in Mexico, Ormazabal will focus mostly on enhancing its team’s leadership and capabilities. But Flores does not discard the possibility of expanding its physical assets. “The final implementation of a manufacturing facility will depend on the evolution of our business in Mexico. We have positive expectations but we want to see how the market evolves before making any significant investment,” he says.