Renewables Project Savoir Faire for Mexico's Dg and PPASFri, 02/01/2019 - 09:11
While the long-term electricity auctions have attracted a great number of participants from around the world, one challenge for midsized developers, such as Valeco Energía Mexico, remains financing. “Whereas large developers can rely on their own financial arm, using shareholder capital and investors as creditors, each of our projects create a singular entity fully dedicated to its respective project, with a mandate to provide a positive end result,” says Florian Goutte, the company’s Latin America Development Manager. “We rely exclusively on project finance while auction winners primarily use corporate finance.”
The French developer has an ace up its sleeve, however, as the Caisse des Dépôts et des Consignations, a French public financial institution, owns 35 percent of the group. “This institution has been generating green income since 2008, with attractive security-versus-yield ratios,” Goutte says. “The Caisse des Dépôts et Consignations started with a 10-15 percent share in Valeco and steadily increased that to today’s 35 percent.”
Valeco’s entry into Mexico in 2015 was the result of business dealings north of the border. “From our core of Francebased projects, we detected a biogas plant opportunity in Montreal, Canada,” Goutte says. This project also served as a platform for entry into a wind farm project, also in Canada. “Thanks to our different contacts and projects, after opening our Canadian offices we realized there was potential to be tapped in Mexico,” he says. While the French multinational has worked on solar and wind projects in the past, it is focusing its effort on commercial and industrial scale PV systems.
There is no doubt that Mexico’s long-term electricity auctions have taken pride of place in the country’s energy transition. Parallel to each edition comes the opportunity for industrial and commercial players to reap the benefits of cleaner and cost-effective power production, injecting additional competitiveness through reduced energy consumption costs. Goutte says this highlights the necessity for flawless project finance.
Bolstered by its support from the pension fund, Valeco is positioning itself to capitalize on the sizeable market that involves private PPAs among the country’s industrial players, which Goutte estimates to include 20GW of potential PV projects for this niche alone. But this does not mean the company is limiting its scope. “Mexico’s opportunities are three-pronged: distributed generation projects of 500kW and upward of installed capacity, private PPAs and the long-term electricity auctions,” he says. Valeco is focused primarily on the first two.
The company’s Mexico subsidiary is well-positioned to service the PPA and DG niche, considering its more than 300MW global portfolio of operational projects, parallel to 1GW in development and more than 20 years of experience in project development. “Valeco’s expertise is spread throughout each link of the value chain, meaning we can develop projects throughout each of its phases,” Goutte says. “This includes securing land, administrative procedures, permitting, measuring resource potential, be it solar, wind or biomass, engineering, work oversight and O&M services.”
Goutte applauds the implementation of the Energy Reform in Mexico that have placed a spotlight on the country’s renewables potential. “The process has worked well and names such as Enel Green Power entering Mexico’s energy sector have a pull effect, causing other players in the industry to seek a foothold in a market where industry heavyweights are doing business,” Goutte says.
As proof that the company is in Mexico for the long term, Valeco Energía México is polishing the details of its development plan and business prospects for 2018-2024 in Mexico. “We are gauging the aggressiveness and ambition with which we will lay our foundations in renewables in Mexico,” says Goutte. “We are intent on developing a share of the PV potential the country holds for industrial and commercial applications.” The company also plans to use the country as a base to new markets. “Mexico is set to serve as our central office to cover the rest of Latin America,” Goutte says.